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Ceiling Décor Ltd v. Parratt [2004] ScotCS 56 (05 March 2004)

OUTER HOUSE, COURT OF SESSION

OPINION OF

LORD MACKAY OF DRUMADOON

in the cause

CEILING DÉCOR LTD, a company incorporated under the Companies Acts having its registered office at 34 Guthrie Port, Arbroath and a place of business at 26/32 Commercial Street, Dundee

Pursuers;

Against

MRS CAROL ANN PARRATT, 22/26 Commercial Street, Dundee

Defender:

________________

Pursuers: R. W. J. Anderson, Q.C.; Balfour & Manson

Defenders: Sandison; Morton Fraser

5 March 2004

Introduction
[1] In this action, which was raised on 20 June 2001, the pursuers are Ceiling Décor Ltd and the defender is Mrs Parratt. The conclusions in the summons are in the following terms: -

"1. For declarator that the Defender has failed to implement the obligation upon her to deliver the deed narrated in conclusion 2 hereof.

2. To ordain the Defender to deliver to the Pursuers, within fourteen days of decree being pronounced, a validly executed Deed of Servitude in favour of the Pursuers, in respect of the entrance and stairway leading from the pavement of Commercial Street up to the top flat of said tenement, which entrance and staircase (sic) form part of all and whole the subjects lying on the west side of Commercial Street, Dundee and known now as 22/26 Commercial Street, Dundee, from the ground to the third floors of the said entrance and passageway and that Deed of Servitude being for all purposes necessary for utilising the said entrance and stairway as a fire escape.

3. Failing implement aforesaid, to authorise the said deed to be signed and delivered by the Deputy Principal Clerk of Session in place of the Defender and to sign and deliver or (sic) necessary deeds or consents to give effect to the parties agreement detailed in conclusion 1 above.

4. To ordain the defender within fourteen days of decree being pronounced to implement her agreement to create a new hatchway in the pursuers' premises at 26/32 Commercial Street, Dundee to enable the pursuers to gain access to the roof of said premises for purposes associated with roof and lift main entrance.

5. For the expenses of the action."

In the present action, Ceiling Décor contend that the parties entered into a binding settlement of an action raised in the Court of Session in November 1995 ("the earlier action"), in which Mrs Parratt is the pursuer and Ceiling Décor Ltd are the defenders. For the avoidance of any confusion, in this Opinion I intend to refer to the parties to the present action as Ceiling Décor Ltd and Mrs Parratt.

[2] Both Ceiling Décor Ltd and Mrs Parratt own premises in Commercial Street, Dundee, which lies in the centre of the city. Their respective premises are of some age. When constructed, they formed parts of a terrace of similar buildings. The upper floors of their respective premises may originally have been residential properties. Central to the disputes between the parties is a stairway, which for those entering from Commercial Street is reached through an outside door and a short entrance hall or passageway. In this Opinion, I intend to refer to the stairway and the entrance hall as "the stairway". In the earlier action, the parties claim rights of ownership in the stairway. There are four floors of premises on each side of that stairway. Mrs Parratt owns the premises to the left of the stairway (when the stairway is viewed from Commercial Street). Her premises are known as 22/26 Commercial Street, Dundee. Each of the four floors of Mrs Parratt's premises is separately occupied. The ground floor is used as a beauty salon. Access to the beauty salon is gained through a further doorway at street level, which opens directly onto Commercial Street. Mrs Parratt, who is a qualified solicitor, carries on practice as a solicitor from office premises at first floor level. The offices at second floor level are leased by Mrs Parratt to a financial institution. The premises on the upper floor are currently vacant and are used as a store by Mrs Parratt. Access to each of these three upper floors is gained via the stairway.

[3] The premises that lie to the right of the stairway (as one looks from Commercial Street) are known as 26/32 Commercial Street, Dundee. There is no dispute that they are owned by Ceiling Décor. Ceiling Décor's premises also extend to four floors. At the time of their construction Ceiling Décor's premises probably constituted separate floors. All four floors are now operated as one set of retail premises. Staff and customers can gain access to the retail premises at ground floor level. They do so through a doorway that is located some distance to the right of the doorway leading into the stairway. Once inside the retail premises, customers and staff are able to move from one floor to another, by means of an internal staircase and lift.

[4] Doorways are also located on each of the upper floors of Ceiling Décor retail premises. The doorways may well have been installed when the terraced premises were first erected. In any event, these doorways, which lead onto the three upper landings of the stairway, are capable of affording means of access to or egress from Ceiling Décor's retail premises.

[5] Ceiling Décor acquired their premises in 1994. Prior to then, Ceiling Décor's premises had also been used for retail purposes by their former proprietors. Shortly after Ceiling Décor acquired their premises, a complex series of disputes arose between the parties, including disputes relating to the existence, nature and extent of their respective rights of ownership in, and right to make use of, the stairway. During the course of the proof before me, I was not provided with full details of the disputes between the parties, nor about the litigation that those disputes have given rise to. It appears clear, however, that, since Ceiling Décor acquired their premises, they have sought to use the stairway for three purposes. Firstly they have sought to use the stairway as a fire escape. Secondly they have sought to use the stairway to facilitate their gaining access to the roof of their own premises, through an access hatch, which is located in the roof at the top of the stairway. Thirdly they have sought to use the stairway to move large items of furniture in and out of their retail premises, through the doorways located on the three upper landings of the stairway. As far as the second of those purposes is concerned, Ceiling Décor have sought access to the roof to enable them to carry out repairs to the roof of their own premises and to gain access to a lift shaft, which is located on their roof. There is no hatch in the roof of Ceiling Décor's own premises, which would allow such access to be gained.

[6] As I have indicated, the present action arises out of an alleged settlement of the earlier action. Mrs Parratt raised the earlier action in November 1995. Ceiling Décor are the first defenders in the earlier action. I understand the other defenders to be directors of Ceiling Décor. It appears that the earlier action proceeded to proof on a "Closed Record (as even further amended)" dated November 1999. That Closed Record was lodged as a production in the present action. At one stage during the proof before me, counsel for Mrs Parratt raised the suggestion that the Closed Record may have been amended further, before the proof in the earlier action got under way. That suggestion was not pursued. In the earlier action, Mrs Parratt, as the pursuer, concludes for inter alia (a) declarator that as the heritable proprietor of the tenement known as 22/26 Commercial Street, Dundee, she has the sole and exclusive right of ownership of the entrance and stairway leading up from Commercial Street, up to the top floor of that tenement ("the stairway" as I have defined them), (b) declarator that Ceiling Décor, for their part, as the owners of subjects lying on the other side of the stairway, have no right or title to use, occupy or enter upon the stairway, and (c) reduction of that part of Ceiling Décor's recorded title to their premises that refers to the stairway. In the earlier action Mrs Parratt also has three conclusions for interdict designed inter alia to prevent any director, employee, contractor, agent or customer of Ceiling Décor from entering into the stairway, whether through the doorway leading from Commercial Street or otherwise.

[7] The Closed Record in the earlier action also discloses that Ceiling Décor have counterclaimed against Mrs Parratt, concluding inter alia for (a) declarator that as heritable proprietors of the subjects known as 26/32 Commercial Street, Dundee, they are also heritable proprietors of the stairway up to the mid-line of what is referred to as "the passageway situated between the subjects owned by Ceiling Décor and those owned by Mrs Parratt" and (b) declarator that Ceiling Décor have a common interest in the remainder of the stairway and are consequently entitled to use of and enjoyment of use of the entire stairway. In their counterclaim in the earlier action, Ceiling Décor also have alternative conclusions for declarator that they enjoy servitude rights of access to the stairway, including declarators specifically directed to establishing the existence of servitude rights of access to the stairway, to enable the stairway to be designated as a fire exit and to allow use of the stairway and the roof hatch, at the top of the stairway, for the purposes of maintaining and repairing the lift within their premises. Ceiling Décor also have two conclusions for interdict against Mrs Parratt.

[8] It appears that prior to the earlier action being raised, some use was made of the stairway as a fire escape and that it was designated as such in the fire certificate issued by the local fire authority in respect of Ceiling Décor's retail premises. At a hearing in the earlier action, on 26 April 1996, both Mrs Parratt and the defenders in the earlier action gave undertakings to the Court. The defenders undertook not to use the entrance from Commercial Street and the stairway, except as a means of egress in the event of fire or for the purposes of a fire drill during normal business hours, at quarterly intervals in terms of Ceiling Décor's fire certificate. Mrs Parratt undertook to permit such use of the stairway and also undertook not to molest the fourth defender, Mrs Mary Milton, by abusing her verbally, threatening her, putting her into a state of fear and alarm and distress and using violence towards her. My understanding is that those undertakings remain in existence and that since April 1996 Ceiling Décor have been able to make use of the stairway as a fire escape, within the terms set out in the undertakings to which I have referred.

[9] The earlier action went to proof before Lord Bonomy. At the proof, John L. Mitchell, Q.C., and John Mure, Advocate, who were instructed by Simpson & Marwick W.S., represented Mrs Parratt. Ceiling Décor were represented by Malcolm Thomson, Q.C., and Andrew Smith, Advocate (as he then was), who were instructed by Balfour & Manson, Solicitors, acting as Edinburgh respondents for Claremonts, Solicitors, Glasgow. The proof began on 2 May 2000. After four days of evidence, the proof was adjourned until Tuesday 15August 2000, on which date it was anticipated that further evidence would be led on behalf of Mrs Parratt. A further eight days of continued proof had been allocated and provisionally fixed for October 2000.

[10] In the course of this Opinion, it will be necessary for me to consider in some detail what happened on 15 August 2000. To a lesser extent, I will require to address what happened during the days before and the weeks following that date. At this stage, however, it might be helpful to summarise what is not in dispute about the events of 15 August 2000. When the case first called before Lord Bonomy, on 15 August 2000, counsel for Mrs Parratt sought an adjournment of about an hour. This was to allow further discussions to take place about proposals that had been put forward by Mr Thomson, senior counsel for Ceiling Décor. That motion was not opposed and was granted by Lord Bonomy. Thereafter, various discussions ensued between the counsel acting for both parties. The Court reconvened about two hours later. During this second hearing, Lord Bonomy was informed that the parties had reached agreement on a number of matters, leaving other contingent matters to be resolved. On the joint motion of parties, Lord Bonomy was invited to discharge the continued diet of proof. He agreed to do so. A By Order hearing was fixed for 4 October 2000. By Order hearings took place on 4 October 2000, 13 December 2000 and 9 February 2001. On 9 February 2001, the Court was informed that the settlement, which had been anticipated in August, had not happened, that the earlier action would require to proceed and that a further continued diet of proof should be fixed.

The issues in the present proof
[11] On 20 June 2001 the present action was raised as a commercial action. I have already quoted the conclusions to the summons. After certain preliminary procedure, both parties lodged Notes of Proposals for Further Procedure. Following a procedural hearing on 10 June 2002, Lord Macfadyen pronounced an interlocutor allowing a proof on certain of the issues formulated in the Notes of Proposals. It was a matter of agreement between the parties that the numbers of process of their respective Notes of Proposals had been transposed in the text of Lord Macfadyen's interlocutor.

[12] At the outset of the proof before me, I sought to clarify with parties the issues that they wished me to determine during the course of the proof and, in particular, what parties intended by the use of the term "formally valid agreement", which appears in Mrs Parratt's Note of Proposals.

[13] Having regard to the discussion with counsel, which then ensued, it is appropriate that I should set out the issues that are before me. I do so by reference to the terms of the Notes of Proposals for Further Procedure, as these were clarified by counsel. Paragraph 1 of Ceiling Décor's Note of Proposals indicates that Ceiling Décor's case involves the propositions that a legally enforceable agreement, binding upon the parties, was entered into on 15 August 2000, that that agreement was made by mandatories acting with ostensible authority and in receipt of clear instructions and that the terms of that agreement were thereafter recorded in a document entitled "Heads of Agreement". The factual matters which Ceiling Décor seek to have resolved in the proof are set out in paragraph 2 of the Note of Proposals. They are (i) What passed between counsel for the parties? and (ii) What passed between counsel and their clients and in particular, between counsel for Mrs Parratt and Mrs Parratt? Counsel for Ceiling Décor indicated that what Ceiling Décor were seeking from the proof was that I should repel the third plea-in-law for Mrs Parratt and issue an Opinion dealing with the questions of fact that arise, in respect of the questions posed in paragraph 2. The third plea-in-law for Mrs Parratt is in the following terms:-

"Esto the Heads of Agreement condescended upon were intended to create legal relations (which is denied) counsel instructed on behalf of the defender not having had authority to conclude the heads of agreement condescended upon on her behalf, the defender should be assoilized."

Counsel for Ceiling Décor made it clear that I was not being required to look at the issue of the form that the Heads of Agreement took.

[14] Paragraph 1 of the Note of Proposals for Further Procedure lodged on behalf of Mrs Parratt posed this question: "Was there ever a formally-valid agreement to settle the previous action on the basis set out on the Heads of Agreement document produced by (Ceiling Décor)?". It also invited the Court to address the following group of issues:-

(a) What was the extent of the instruction given by Mrs Parratt to her counsel as regards settlement of the previous action?;

(b) Did (Mrs Parratt) at any material time have knowledge of, or give consent to, the terms of the Heads of Agreement document?;

(c) To what extent, if any, did the Heads of Agreement document reflect the instructions given by (Mrs Parratt) to her counsel?; and

(d) To what extent did counsel involved in the earlier action (on each side) demonstrate or provide evidence of their intention to create legal relations based on that document?

[15] Counsel for both parties were agreed that Lord Macfadyen's interlocutor intended to order that the proof covered the factual issues relating to heads (a), (b) and (c). Having said that, it was also agreed that there was not a complete identity of issues amongst the parties. Heads (a), (b) and (c) cover the same ground as the issues raised in paragraph 2 of Ceiling Décor's Note of Proposal. However, the preamble to paragraph 1 and head (d) touch on the additional issues of whether the counsel involved on 15 August 2000 had intended to enter into a binding agreement, to settle the earlier action, and whether (regardless of their intentions) any agreement they had reached (or the Heads of Agreement they had prepared) was capable of being a contract binding on Ceiling Décor and Mrs Parratt. Counsel for Mrs Parratt indicated that at the conclusion of the proof he would be inviting me to sustain either or both of Mrs Parratt's first and third pleas-in-law, the first being a general plea to the relevancy of the action and the third plea-in-law being directed to counsel's alleged lack of authority. Counsel for Ceiling Décor was content that I should consider all of the issues raised by counsel for Mrs Parratt, although he expressed some concern that doing so might involve touching on Mrs Parratt's fourth plea-in-law, which raises the issue of whether the contractual obligation relied upon by Ceiling Décor in the present action is void from uncertainty. That issue had not been remitted for proof by Lord Macfadyen.

[16] During the course of the proof before me, I heard evidence from Mr Thomson, Mr Mitchell, Mr Mure, Mr Smith, Mr David McIntosh, (a partner of Balfour & Manson) Mr Ranald Macpherson, (a partner of Simpson & Marwick), all of whom were called on behalf of Ceiling Décor, and also from Mrs Parratt and her husband, Dr Parratt. The evidence extended over seven days. The submissions extended over two further days.

[17] The witnesses, who gave evidence during the proof, were asked to recall the details of what had happened several years previously, in particular during August 2000. Although one of the witnesses had taken contemporaneous notes and two had drafted file notes and/or letters in the days and weeks following 15 August 2000, the majority of the witnesses required to rely on their unaided recollection of events. Hardly surprisingly, in view of the passage of time, those recollections were incomplete. Indeed in certain instances, there were significant gaps in what individual witnesses claimed to be able to recollect as to what had been done and said, by themselves and others, on or around 15 August 2000. In such circumstances, it has been necessary for me to consider, with some care, the reliability of the evidence given by all of the witnesses from whom I heard.

[18] In presenting his submissions on behalf of Mrs Parratt, counsel for Mrs Parratt stressed that he was not suggesting that any of the witnesses should be treated as have given untruthful or incredible evidence. He invited me to proceed on the basis that all of the witnesses had been doing their best to tell the truth. In particular, he submitted that he was not suggesting that any piece of evidence given by a witness called by Ceiling Décor should be rejected as having been given untruthfully. He confined his submissions to criticising the reliability of the evidence founded upon by Ceiling Décor. In particular, he attacked the reliability of the evidence given by Mr Mitchell, and to the lesser extent that given by Mr Mure and Mr Macpherson, contending that their evidence had been based, at least in part, on their individual reconstructions of what they believed had happened on 15 August 2000, rather than on full and accurate recollections of what had occurred that day. The contention was that the counsel and solicitors, who had been instructed in the proof before Lord Bonomy, had subsequently discussed matters with others. They had done so after it had become clear that Ceiling Décor and Mrs Parratt were in dispute as to whether the earlier action had been settled, in terms of an agreement alleged to be reached on 15 August 2000. As a consequence, the witnesses had, at least subconsciously, sought to reconstruct events in their minds. Accordingly, the recollections of the individual counsel and solicitors involved in the earlier action were not as reliable as they might otherwise have been. Furthermore, in addition to the discussions in which they had been involved, they had also, at least in some instances, been given sight of the contemporaneous handwritten notes, taken by Mr McIntosh during the course of 15 August 2000. Those notes formed a production in the present action. Mr McIntosh was also criticised for having acted for Ceiling Décor in the present action, despite the fact that he knew he was going to be called as a witness during the proof.

[19] As far as those criticisms are concerned, I had no impression during the proof that the evidence given by the counsel and solicitors who had acted during the proof before Lord Bonomy had been contaminated by any discussions that may have taken place during the months following 15 August 2000. On the contrary, there were a number of discrepancies in the evidence given by those witnesses. In my opinion, such discrepancies tend to point in the opposite direction from any inclination on the part of individual witnesses to reconstruct their recollections of events, so as to reconcile their evidence with what they understood would be the evidence of others.

[20] As far as the evidence of Mr McIntosh was concerned, the evidence he gave was entirely consistent with what were accepted as being his contemporaneous notes. I cannot identify any good reason for taking the view that those notes were anything other than entirely accurate and that he had recorded, albeit in summary form, what had been discussed on 15 August 2000, during the meetings between Mrs Milton of Ceiling Décor and Ceiling Décor's counsel and solicitors, and what had been said during the two short hearings before Lord Bonomy. Nor do I consider that Mr McIntosh's evidence was in some way contaminated and for that reason unreliable, by reason of the fact that he is acting for Ceiling Décor in connection with the present action. During the proof before me, he was not present in court until he gave evidence.

[21] Senior counsel for Ceiling Décor submitted that questions of credibility, as well as questions of reliability, did arise. They arose, in particular, as to the evidence given by Mr Mitchell on the one side and Mrs Parratt and Dr Parratt on the other, about what had passed between Mr Mitchell and Mrs Parratt on the morning on 15 August 2000. That was one reason why I arranged for the notes of evidence to be extended.

[22] I have reached the view that I should deal with the factual issues that have been raised under two chapters:- (a) What passed between the parties' respective legal advisers in the run up to 15 August 2000, on 15 August 2000 and, to a limited extent, in the weeks and months thereafter?; and (b) What passed between Mrs Parratt and her counsel, Mr Mitchell and Mr Mure, and her solicitors, Simpson & Marwick, on 14 and 15 August 2000, which includes, but is not limited to the important issue of what instructions Mrs Parratt gave Mr Mitchell on15 August 2000, in connection with his negotiations with Mr Thomson?

[23] I do not suggest that these chapters are entirely discrete. A lot of the evidence I heard is relevant to both chapters. However, I think that it would be sensible if I seek to address the factual issues in that way. In the first chapter I will also touch on what passed between Mr Thomson, Mr Smith and their instructing solicitors and Mrs Milton, a director of Ceiling Décor. There is, of course, no suggestion that Mr Thomson did not have full instructions from Ceiling Décor to conclude the agreement, which Ceiling Décor maintain was entered into on 15 August 2000.

What took place on 15 August 2000?
[24] In preparation for the continued proof, that was scheduled to begin on 15 August 2000, Mr Thomson consulted with his clients on the morning of Friday 11 August 2000. Mr Smith was on holiday and was not present. Nor was Mr McIntosh. Mr and Mrs Milton, who are both directors of Ceiling Décor, were. During the course of that consultation, there was some discussion as to the basis upon which the earlier action might be settled. As a consequence of those discussions, Mr Thomson was authorised to put certain settlement proposals to Mr Mitchell. Those proposals were (a) that Mrs Parratt would be entitled to declarator in terms of the first conclusion of the summons, which would be a declarator of her ownership of the stairway, (b) that Ceiling Décor would be granted a servitude right of access to use the stairway for fire escape purposes, (c) that Ceiling Décor would be granted a servitude right of access to use the stairway and to gain access through the hatch at the top of the stairway, to enable them to carry out maintenance to their lift shaft and the roof of their premises, and (d) that there would be no further finding of expenses due or to or by either party, in respect of the expenses of the earlier action. Those proposals, which Mr Thomson was instructed to put to Mr Mitchell, obviously involved Ceiling Décor agreeing to depart from their claim to any rights of ownership in the stairway. On the other hand, Ceiling Décor were clear that they wished to adhere to their claim for a servitude right of access to enable the stairway to be used as a fire escape. That was necessary to enable Ceiling Décor to protect the value of their premises, which require a fire escape, acceptable to the local fire authority.

[25] Mr Thomson contacted Mr Mitchell on the Friday afternoon. He put those proposals to Mr Mitchell. During the course of his telephone conversation with Mr Mitchell, Mr Thomson also mentioned that Ceiling Décor would like to obtain a personal right to move heavy items of furniture up and down the stairway. It was made clear, however, that such a personal right did not require to be part of any settlement.

[26] When he gave evidence, Mr Mitchell said that he only had a very limited recollection of his telephone conversation with Mr Thomson on the Friday afternoon. Indeed Mr Mitchell stated that he had no recollection of Mr Thomson of having put any specific proposals for settlement to him, before the morning of Tuesday 15 August 2000. Nor did Mr Mitchell have any recollection of discussing settlement proposals from Ceiling Décor with Mrs Parratt and Dr Parratt, during the consultation he had attended on Monday 14 August 2002. He did not, however, dispute that it was possible that such proposals had been made to him by Mr Thomson on the Friday and that they had been discussed between Dr and Mrs Parratt and himself during the course of the consultation on the Monday afternoon.

[27] Likewise, Mr Mure had no recollection of any settlement proposals, originating from Ceiling Décor, having been discussed during the consultation on the Monday afternoon, which he did remember attending. Mr Mure's recollection was of being told by Mr Mitchell that Mr Thomson had phoned him during the evening of Monday 14 August and had put forward some proposals at that time. Mr Mure could not recall what those proposals had been.

[28] Notwithstanding the evidence given by Mr Mitchell and Mr Mure, I am quite satisfied that Mr Thomson did contact Mr Mitchell on the afternoon of Friday 11 August 2000 and that, as instructed, he put settlement proposals to Mr Mitchell. In particular, I accept Mr Thomson's evidence that Mr Mitchell was told at that time that Ceiling Décor would concede their claim to any rights of ownership in the stairway, as part of an overall settlement of the earlier action. I also accept Mr Thomson's evidence that, during that conversation, Mr Mitchell indicated to him that he would take instruction on those proposals, but that he would be unable to respond to Mr Thomson before the Tuesday morning.

[29] It is clear from the evidence I heard that by the date of the consultation on Monday 14 August 2000, if not indeed from a much earlier date, Mr Mitchell was aware that there were two main matters of concern to Ceiling Décor, namely gaining access to the stairway for fire escape purposes and gaining access to the roof for the purposes of carrying out lift and roof maintenance. Both these concerns were, of course, addressed in the settlement proposals that Mr Thomson put to Mr Mitchell.

[30] In the event, Mr Mitchell consulted with Mrs Parratt and her husband, Dr Parratt, during the afternoon of Monday 14 August. Mr Mure was present. David Parratt, Advocate, who is the son of Dr Parratt and Mrs Parratt was not present. Two representatives of Simpson & Marwick were present, namely Mrs Catherine Shaw, a senior partner with that firm, and an unnamed assistant. I will deal later in this Opinion with what happened during that consultation. At this stage I merely record that neither Mrs Shaw nor the unnamed assistant gave evidence during the proof before me and that if any notes were taken at that consultation, none of those notes were lodged as productions in the present action. I should also record that in their evidence both Mrs Parratt and Dr Parratt recalled having been advised by Simpson & Marwick, in advance of the consultation, that Ceiling Décor had come forward with proposals to settle the action. They also recalled discussing proposals from Ceiling Décor during the consultation. Their recollection on these matters is accordingly consistent with the evidence that Mr Thomson gave. If, prior to the consultation being convened, Mr Thomson contacted Mr Mitchell and conveyed settlement proposals to him, it is, in my opinion, inconceivable that Mr Mitchell would not have discussed those proposals with Mrs Parratt, during the course of the consultation.

[31] On the morning of 15 August 2000, all those involved in the continued proof convened in Parliament House. Dr and Mrs Parratt were present, together with their son, David Parratt. Mr Mitchell, Mr Mure and Mr Macpherson were also present. A number of witnesses, who had been cited to give evidence on behalf of Mrs Parratt, were in attendance. On Ceiling Décor's side of the case, Mrs Milton was present, as were Mr Thomson, Mr Smith, Mr McIntosh and Ms Yvonne Morgan, a qualified solicitor with Claremonts, Solicitors, Glasgow.

[32] As I have already indicated, Mr McIntosh made some contemporaneous notes as the morning progressed. These are in hand-written form. They were lodged as a production and were regularly referred to during the course of the evidence. They proved to be invaluable in clarifying the chronology of events, not only when Mr McIntosh gave evidence himself, but also during the evidence of other witnesses. Around lunchtime on 15 August 2000, Mr Macpherson was provided with a copy of Heads of Agreement that had been prepared by the four counsel present that day. Subsequently, Mr Macpherson dictated a file note dealing with the events of 15 August 2000. That was also lodged as a production and has proved to be of some assistance in seeking to piece together the events of 15 August 2000, although not to the same extent as Mr McIntosh's notes have done.

[33] After Dr and Mrs Parratt arrived in Parliament House, they were taken to the Octagonal Room in the Advocates' Library. David Parratt may also have been present. In the Octagonal Room, Dr and Mrs Parratt met with Mr Mitchell, Mr Mure and Mr Macpherson. Whilst Mr Mure and Mr Macpherson appear to have been present at the outset of the discussions in the Octagonal Room, they did not remain throughout, having gone to deal with the initial hearing before Lord Bonomy.

[34] It is clear from the evidence Mr Thomson and Mr Mitchell gave that they spoke together, fairly early on the morning of Tuesday 15 August 2000. That was either shortly before or immediately after the initial hearing before Lord Bonomy, which, according to Mr McIntosh's notes, began at 10.05 am. The case called in one of Courts 6, 7 or 8. One of Mrs Parratt's counsel, probably Mr Mure, explained to Lord Bonomy that Mr Thomson had made settlement proposals on the previous Friday, that Mr Mitchell had consulted with Mrs Parratt the previous day and that he was engaged in consultation with her at the moment. An adjournment was sought to allow further discussions to take place. That motion was not opposed and an adjournment was granted.

[35] By 10.25 am, Mr Mitchell and Mr Thomson had concluded their initial discussions. During those discussions, Mr Mitchell told Mr Thomson that Mrs Parratt essentially accepted the proposed settlement, but that she did so subject to two refinements. The first point of concern related to Ceiling Décor's request for a servitude right of access for fire escape purposes. Mr Mitchell informed Mr Thomson that Mrs Parratt had been advised that it would be difficult, if not impossible, for her to obtain insurance cover, to allow the stairway to be used as a fire escape for Ceiling Décor's retail premises. The second point of concern related to Ceiling Décor's proposed use of the access hatch at the top of the stairway, to enable Ceiling Décor to gain access to the roof for the purposes of maintaining the roof and the lift shaft. Rather than agree to that, Mrs Parratt wanted Ceiling Décor to construct a hatch through the roof of their own premises. Mr Mitchell indicated to Mr Thomson that Mrs Parratt might be prepared to pay for such a hatch to be installed.

[36] At 10.25 am, Mr Thomson and Mr Smith met with Mrs Milton of Ceiling Décor, Mr McIntosh and Yvonne Morgan. They met in a witness room located near Courts 6, 7 and 8. Following his discussions with Mr Mitchell, Mr Thomson was able to inform Mrs Milton and her solicitors that Mrs Parratt had considered the proposals that he had put to Mr Mitchell and that Mrs Parratt was agreeable to them, subject to the two refinements or qualifications to which I have referred. Mr Thomson also told Mrs Milton that he had been informed by Mr Mitchell that whilst the expenses of the action were a concern to Mrs Parratt, she was at that stage agreeable to a finding of no expenses to due or by either party. Mrs Parratt was not, however, agreeable to any use of the stairway for moving furniture, which had been a request that Mr Thomson had put forward to Mr Mitchell, but not one that had formed part of the proposals for settlement of the earlier action.

[37] Mr Thomson and Mr Smith discussed Mrs Parratt's response with Mrs Milton and her solicitors. Mr Thomson was given instructions to endeavour to conclude a settlement on the basis that subject to insurance cover being available, a servitude right of access for fire escape purposes would be granted to Ceiling Décor, that a hatch would be installed in Ceiling Décor's own premises, at Mrs Parratt's expense, and that no further award of expenses, due to or by either party, would be made. Around 10.55 am, Mr Thomson and Mr Smith departed from that meeting to discuss matters further with Mrs Parratt's counsel.

[38] Further discussions then took place between Mr Mitchell and Mr Thomson. During the evidence, there was a measure of uncertainty as to where these further discussions took place and, in particular, whether they took place in Parliament Hall or in the foyer outside Courts 6, 7 and 8. It is probable that they took place in Parliament Hall and that Mr Smith and Mr Mure accompanied their respective seniors, during the discussions between senior counsel and when senior counsel were consulting with their respective clients. These discussions appear to have concentrated on the availability of insurance cover for the use of the stairway as a fire escape and the practicalities and cost of installing a hatch in the roof of Ceiling Décor's premises. During these discussions, no other reason was put forward by Mr Mitchell as to why it might be difficult, let alone impossible, for Mrs Parratt to grant a deed of servitude for fire escape purposes, although the detailed terms of the Deed of Servitude sought by Ceiling Décor were not discussed.

[39] When the absence of any discussion about the detailed terms of the proposed right of servitude was raised with Mr Thomson during cross-examination, his response was that it had seemed to Mr Mitchell and himself that a servitude for fire escape purposes was something that was "very simple and straightforward", as was illustrated by the fact that a servitude for similar purposes had been sought in one of the conclusions in the counterclaim to the earlier action. During cross-examination, Mr Thomson also confirmed that during his various discussions with Mr Mitchell on 15 August 2000, there had never been any suggestion that Ceiling Décor's right of access to the stairway, in the event of a fire, should be limited to a personal right of some sort, such as a lease. Mr Mitchell gave evidence to similar effect.

[40] During the course of these further discussions between senior counsel, which were not continuous, but were interrupted, from time to time, by senior counsel returning to speak to their respective clients, mention was also made of another matter which had apparently been causing some concern to both parties. That related to the fact that it was physically possible for persons to move freely between the basements of the premises owned by Ceiling Décor and Mrs Parratt. Mr Mitchell indicated to Mr Thomson that Mrs Parratt had informed him that she intended to block up her side of the gap between the basements of the two sets of premises and that she was content that Ceiling Décor could secure their side of that gap in whatever manner they wanted. It was agreed by Mr Mitchell and Mr Thomson that issue should form part of the agreement between the parties. By the time these further discussions between senior counsel came to an end, senior counsel had agreed between them that the Court should be invited to discharge the continued diet of proof, on the basis that parties had reached agreement on certain matters and anticipated that the litigation could be resolved, once certain contingencies had been addressed. The matters agreed between the counsel were that Mrs Parratt would receive a declarator of ownership of the stairway, that Mrs Parratt should grant a degree of servitude in favour of Ceiling Décor, allowing use of the stairway as a fire escape, provided adequate insurance was available, that Mrs Parratt would be given the option of arranging for and paying for the installation of a hatch in Ceiling Décor's roof, failing which the parties would agree suitable access through the hatch at the top of the stairway, that there would be no award of expenses due or to either party, and that the access arrangements between the basements of the two sets of premises should be made secure. Counsel for both parties also agreed that the matters agreed should be incorporated in Heads of Agreement.

[41] Around 11.45 am, Mr Thomson returned to the witness room and resumed his discussions with Mrs Milton and Ceiling Décor's solicitors. He indicated that Mr Smith and Mr Mure were going to draft Heads of Agreement. He also indicated that, subject to the insurance position being clarified, Mrs Parratt would grant a servitude right of access to the stairway, to enable the stairway to be used as a fire escape. There is an entry to that effect in Mr McIntosh's notes, which supports Mr Thomson's recollection that was what he and Mr Mitchell had agreed. Mr Thomson also advised Mrs Milton and Ceiling Décor's solicitors that there was a need to explore the availability of insurance for third party liability, arising out of the use of the stairway as a fire escape.

[42] Mr Thomson advised Mrs Milton that it was proposed that Mrs Parratt would arrange for someone to prepare a quotation to install a roof hatch and would draw up plans for this to be done at her expense. He also mentioned that as far as the gap between the basements of the two sets of premises was concerned, Mrs Parratt would secure her side and Ceiling Décor could secure their side however they wished. Mrs Milton was agreeable to that.

[43] Mr McIntosh's notes record the need to get the insurance situation sorted out as soon as possible, to allow access to the roof for a quotation to be prepared, to draft a deed of servitude and that the case should call By Order early in the new court term.

[44] Lord Bonomy sat again around 12.20 pm. Mr Mitchell informed the Court that parties had reached an agreement on a number of matters and anticipated that the litigation was resolved. He indicated that there were a number of contingencies to be resolved, involving third parties, which could not be done in the short term. It was indicated that what had been agreed would save Court time and save expenses. Lord Bonomy was invited to discharge the continued diet of proof and to put the case out By Order, in the new court term.

[45] Mr Thomson intimated to the Court that Ceiling Décor agreed that the diet of proof should be discharged and a By Order hearing be fixed. Mr McIntosh's notes record that Mr Thomson informed Lord Bonomy that Ceiling Décor wished the case to remain on the roll "to ensure agreement is reached". Mr Thomson suggested to Lord Bonomy that the date for the By Order roll hearing would provide a focus for parties. In the event, a By Order hearing was fixed for 4 October 2000.

[46] Notwithstanding what Mr Thomson was recorded as having said at the second hearing before Lord Bonomy, during his evidence Mr Thomson indicated that, by this stage, he was satisfied that he had concluded an agreement with Mr Mitchell that the case had been settled, subject to the insurance contingency. Indeed during the meeting with Mrs Milton and Ceiling Décor's solicitors, that had preceded the second hearing before Lord Bonomy, Mr Thomson indicated to those present that Lord Bonomy would be advised that the parties had reached agreement in principle to settle the action, but subject to certain contingent conditions. Mr Mitchell gave evidence to a similar effect, about what had happened during the second hearing before Lord Bonomy..

[47] At some stage before lunchtime on 15 August 2000, draft Heads of Agreement were prepared. These were typed by Mr Mure, within the Faculty Library. Mr Mure gave evidence that he began drafting the document on his own. He did so on the basis that the document should record the agreement that had previously been reached between senior counsel. He stated he was sufficiently aware of the details of what had been agreed to enable him to go off to the Library to prepare a first draft of what was required. He gave evidence that he had been joined there by Mr Mitchell, who had suggested certain revisals to the draft that he was in the course of preparing on his computer. A draft of the Heads of Agreement was then printed off. A copy of this draft was No.6/14 of Process, which had been lodged by Ceiling Décor. During the course of evidence, that production was referred to as having been a copy of the draft of the Heads of Agreement, which was first handed to Mr Thomson and Mr Smith. The document is unsigned. It is in the following terms:-

" HEADS OF AGREEMENT

...............

Following negotiations with a view to resolving the outstanding issues between parties, counsel record that, subject to a satisfactory resolution of the contingent matters detailed below, the parties have reached agreement that the action be settled upon the following basis:-

1. That decree shall be granted by the Court in terms of, or similar to, the First Conclusion in the Summons.

2. That no expenses shall be due to or by either party, except such as have already been awarded against either party prior to the date hereof.

3. That the parties shall investigate as soon as possible the availability of third party insurance cover for the use of the stair as a fire exit from the Defenders' premises; and that in the event of satisfactory insurance cover being available for both parties, the Pursuer shall grant a Deed of Servitude in respect of a right of egress for fire purposes; providing that if no satisfactory insurance cover is available, the Pursuer shall not be bound to grant such servitude.

4. That the Defenders shall grant access to tradesmen, architects, etc. in order to allow a full estimate and specification (including building warrant and other ancillary costs) to be prepared for the creation of a suitable hatch access through the ceiling and roof above the third floor in the Defenders' premises to provide means of access to the roof and to lift machinery on the roof. The Pursuer shall then elect whether to have the said hatch access created at her expense. In the event that Pursuer decides not to do so, then the parties shall agree suitable access through the present hatch at the top of the stairway within the Pursuer's subjects.

5. Each party shall ensure that any access arrangements to the sewer pipe at basement level are reasonably secure and fire-retardant."

[48] There was some dispute in the evidence as to when this draft of the Heads of Agreement, (No.6/14 of Process), had first been made available to counsel for Ceiling Décor and when the manuscript amendments, which appear on that document, were added to it. In Para. 3 of the document the typed words "in respect of a right of egress for fire escape purposes", which follow after the words "the Pursuer shall grant the Deed of Servitude", have been the subject of a manuscript alteration so that they run "for fire escape purposes". These alterations were written in the hand of Mr McIntosh. Mr Thomson was uncertain whether a typed copy of the draft Heads of Agreement was available before the second hearing before Lord Bonomy commenced. However, Mr Thomson gave evidence that he would not have left the building had he not seen something in writing. He was adamant that before he left Parliament House, around 1 pm, a draft copy of the Heads of Agreement had been received and had been amended with the manuscript alterations to which I have referred. These alterations were included, following discussions between Mr Thomson and Mr Smith on the one side and Mr Mure on the other. Mr Thomson's concern had been that the servitude right of access in favour of Ceiling Décor had to allow not just egress in the event of a fire, but had also to permit access during fire drills and access by fireman fighting a fire, whether within or on the roof of Ceiling Décor's premises. Put broadly, the servitude right of access required to be in terms that would enable Ceiling Décor to use the stairway as a fire escape and comply with the fire certificate in respect of their premises. Those had been matters which he had raised in discussions and agreed with Mr Mitchell.

[49] I accept the evidence of Mr Thomson and Mr Smith that these suggested alterations were raised with Mr Mure before 1 pm. Mr Mure subsequently discussed them with Mr Mitchell, who had no objection to the alterations proposed.

[50] Ceiling Décor's productions in this action also include No.6/2 of Process, which is a typed version of the Heads of Agreement, incorporating the manuscript alterations to No.6/14 of Process. It was signed by Mr Smith and initialled by Mr Mure. Otherwise No.6/14 of Process and No.6/2 of Process are in identical terms.

[51] The counsel and solicitors who had acted for the parties on 15 August 2000 were all asked in evidence what they understood had been agreed, before the continued diet of proof was discharged. Although it was recognised that it was ultimately for me to decide what had been agreed between the parties and the legal effect (if any) of what had been agreed, no objection was taken to that evidence being given during the course of the proof.

[52] It was clear from Mr Thomson's evidence that he regarded the preparation of the Heads of Agreement as being no more that the committal to writing of an agreement that had already been reached between Mr Mitchell and himself. When asked on what basis the diet of proof had been discharged, Mr Thomson answered that it had been on the basis that the case had settled, subject only to contingencies. Mr Thomson stated that the parties had agreed (a) that Mrs Parratt was to be granted declarator, in terms of Conclusion 1 of the summons in the earlier action, (b) that subject only to the availability of adequate third party insurance cover, a servitude would be granted to Mrs Parratt in favour of Ceiling Décor, as proprietors of the adjoining property, to allow the use of the stairway for fire escape purposes only, (c) that Ceiling Décor would allow Mrs Parratt access to the top floor of their premises, for the purposes of investigating the feasibility and cost of constructing a hatch and that if that proved to be too expensive or some other difficulty intervened, then a right of access would be granted by Mrs Parratt through the stairway to the existing hatch at the top of the stairway and (d) that there would be no expenses due to or by either party in the action. He stated that it was his clear understanding that the case had settled, subject to resolving the two contingencies referred to in Paras.3 and 4 of the Heads of Agreement, which in his view were not dependent "on the will of the parties".

[53] Mr Mitchell gave evidence along similar lines. He stated that the agreement had been reached between counsel and then recorded in the Heads of Agreement as an aide memoire. Mr Mitchell stated that, even if the Heads of Agreement had never been prepared, the agreement between counsel would have remained. His view was that the action had settled, subject to the contingency of insurance dealt with in Para.3 of the Heads of Agreement and what he described as the option given to Mrs Parratt, in terms of Para.4 of the Heads of Agreement. His view was that the alteration to the wording of the Heads of Agreement, between Nos.6/14 and 6/2 of Process, did not change the thrust of what had been agreed. During cross-examination, and in re-examination, Mr Mitchell did confirm that when the action had called for a second time before Lord Bonomy, he had asked for the diet of proof to be discharged to enable settlement proposals to be carried through. He stated that he had not been able to state to the Court that what had been agreed was an end to the litigation, because the settlement mechanism required to be carried through. Mr Mitchell indicated that at that stage he had to reserve the right to continue with the proof, in the event that the contingency relating to insurance was not resolved. The final settlement of the action had depended on that contingency being purified and on Mrs Parratt electing which option she was to choose under Para.4 of the Heads of Agreement.

[54] Mr Smith's recollection was that the Heads of Agreement had been exchanged and the alterations had been finalised before the diet of proof was discharged. I have reached the view that he was wrong about the timing of that. As far as Mr Smith was concerned, however, an agreement had been reached to settle the action and that agreement was capable of being implemented.

[55] Mr Mure stated that the Heads of Agreement recorded his contemporaneous understanding of what had passed between Mr Mitchell and Mr Thomson and of the agreement that had been reached between them. Mr Mure did not see the revisals proposed by Mr Thomson and Mr Smith as being a change to what had been agreed. Mr Mure understood that an agreement had been reached, which was sufficient to discharge the diet, and that if the parties were able to proceed on the basis set out in the Heads of the Agreement, then no further proceedings would be required. Mr Mure did not recall any suggestion being made at the time of a fully binding settlement having been entered into. Indeed, such a suggestion would have surprised him. His understanding was that either the parties would be able to proceed, on the basis of the matters agreed and set out in the Heads of Agreement, in which event no further proceedings would have been required, or the case would have required to have been brought back to Court, for a continued diet of proof.

[56] Mr McIntosh considered that the Heads of Agreement, as revised, accurately reflected the basis upon which the parties had reached an agreement that the action be settled. He was absolutely clear that agreement had included reference to Mrs Parratt granting a deed of servitude. Indeed there had been seven references to a deed of servitude in the notes which he had prepared.

[57] Mr Macpherson wrote to Mrs Parratt on 21 August 2000. That letter was lodged as a production during the course of the proof (No.7/21 of Process). It is in the following terms:-

" 21 August 2000

Dear Mrs Parratt,

Carol Parratt v Ceiling Decor

I write in confirmation of my understanding of the agreement reached, albeit conditional on various matters being resolved, at the Court of Session on 15 August. As I understand it, the agreement upon which the proof was discharged was broadly as follows.

The defenders would consent to decree in terms of the first Conclusion of the Summons, or thereby, being for declarator of your right of ownership of the stair.
The expenses will be none to or by except insofar as already dealt with.
Given your concern that it may be impossible to insure the stair for a right of access even only as a fire escape, the parties will investigate as soon as possible the question of third party insurance for this risk. In short, if it transpires that this risk can be insured to your satisfaction, you will consent to granting a servitude right to the stair being only for egress in the event of a fire as a fire escape and also being the minimum necessary fire drills in the stair, no other rights being granted. If the risk proves impossible to insure, the matter will have to be looked at anew and it appears that the only obvious alternative is that the defenders will have to construct their own fire escape probably in their own internal stair by means of additional building works thereto. Although it is not yet part of the present proposals that you may offer it is envisaged to contribute to the cost of that, perhaps by agreeing to waive your entitlement to the expenses already awarded in your favour.
With regard to the access to the roof for lift maintenance etc, you will decide whether you will at your expense construct a new access for the defenders by means of a new hatch being created in their property. The only alternative would seem to be to allow access to the roof through your stair.
It has been agreed that parties shall ensure reasonable access arrangements to the sewer pipe at the basement level are reasonably secure and fire retardent.

Accordingly, I have made arrangements for the By Order on 4 October with regard to ensuring that counsel are available and I have written to Balfour & Manson in respect of the insurance arrangements and the arrangements for the new hatch.

As far as the latter is concerned, I have suggested that Mr Sinclair and, I presume, the contractor who will carry out the work, will be available this week and that Balfour & Manson should contact me as soon as possible with a view to fixing a suitable time when they can visit the defenders' premises.

With regard to the insurance question, I think it was agreed that we need to write as soon as possible to your insurer and/or your broker. What we would propose to say to them is simply that we require to establish (1) whether the right of egress for a fire escape only would be insurable by you and (2) if not, whether there is any way round this problem perhaps by agreement with the defenders' insurers and so on.

In the meantime, as far as counsel's fees are concerned, I confirm that I will try to establish as soon as I can exactly what has been charged to date and I shall let you know what is due.

It seems that matters may be moving to resolution which will be, at least, acceptable to you.

Yours sincerely

Ranald I Macpherson

Associate".

[58] Mr Macpherson had a copy of the Heads of Agreement available to him, at the time he dictated that letter. He did not disclose that fact to Mrs Parratt. The passage at the end of the third numbered paragraph of his letter refers to matters that had been discussed between Mrs Parratt and at least certain of her legal advisers, during the course of 15 August 2000, but had not been mentioned to Ceiling Décor's counsel. Mr Macpherson prepared a file note, in respect of what had happened at Parliament House on 15 August 2000. That file note was in similar terms to his letter to Mrs Parratt.

[59] Mr Thomson and Mr Mitchell were both asked in cross-examination whether there had been any discussions between them about the implementation of the matters dealt with in the numbered paragraphs of the Heads of Agreement. They both agreed that there had been no detailed discussions along such lines. There had, for example, been no discussion about the precise terms of the declarator referred to in Para.1 or about how the detailed terms of the Deed of Servitude, referred to in Para.3, would be adjusted. They both accepted that, as drafted, Para.4 indicated that Mrs Parratt had an option as to whether she would proceed with the installation of a hatch in the roof of Ceiling Décor's premises.

What instructions did Mrs Parratt's senior counsel receive on 15 August 2000?
[60] I turn now to deal with the second chapter of the factual issues that were raised during the proof. As I have indicated, Mr Thomson and Mr Smith both considered that the Heads of Agreement accurately record what had been agreed between Mr Thomson and Mr Mitchell. It was also clear from their evidence that the discussions between them had proceeded on the understanding that Mr Mitchell had been authorised by Mrs Parratt to agree to what ended up being included in the Heads of Agreement. Indeed, Mr Thomson's various negotiations with Mr Mitchell, including those that took place in Parliament Hall itself, could only have proceeded on such an understanding, an understanding which was no doubt reinforced by the fact that, when senior counsel were in Parliament Hall, the negotiations had been interrupted by Mr Mitchell shuttling backwards and forwards, for further discussions with Mrs Parratt.

[61] On any view, the discussions between Mr Thomson and Mr Mitchell produced an agreement as to the basis on which the continued diet of proof was to be discharged, whatever further legal significance or consequences that agreement may have. The factual issue I require to address is whether Mrs Parratt authorised the agreement that Mr Mitchell entered into with Mr Thomson. In addressing this issue, I consider it appropriate that I should pay particular attention to what Mr Mitchell discussed with Mrs Parratt about her granting a servitude right of access to Ceiling Décor in respect of the use of the stairway as a fire escape or for fire escape purposes. I leave to one side, for the meantime, the question of whether there is any meaningful difference between those two formulations. However I also require to consider whether Mr Mitchell had Mrs Parratt's instructions in relation to all of the matters that appear in the Heads of Agreement.

[62] In considering the issue of Mr Mitchell's instructions, certain averments in Mrs Parratt's defences in the present action are of significance. In Answer 4 Mrs Parratt avers:-

"Admitted that each party was represented at the calling of the proof diet in August 2000 by both senior and junior counsel. Admitted that counsel for the present defender (i.e. Mrs Parratt) discussed settlement proposals with her, and discussed the possibility of the grant by her of a deed of servitude, under explanation that the discussions between the defender and her counsel took place in the presence also of agents for the defender, her husband and son. Admitted that the defender made it clear to her counsel that she did not want the pursuers to use her premises other than for egress in the event of fire, and that she made it clear to her counsel that she did not want the pursuers to use the hatch for any purpose, under explanation that the precise extent to which these views were made known to the pursuers by the defender's senior counsel, and the nature of any proposals he may have made to the pursuers, is not known and not admitted."

Later on in Answer 4, the following averments appear:-

"The obligation purportedly contained within the Heads of Agreement is contrary to the express [wishes] instructions of the defender communicated to her counsel prior to the document being drawn up. Prior to conclusion of the discussions between counsel, which took place at the continued diet of proof, the defender intimated to the counsel instructed on her behalf that she was not willing to grant a servitude over property owned by her. She indicated that she would only consider granting a limited personal right of access. That position was again made clear to senior counsel for the defender in the course of his negotiations with counsel for the pursuers, and was reiterated to him by the defender as he waited in Court to inform the Lord Ordinary that parties wished to discharge the diet of proof in order to attempt to settle the action."

Answer 5 of Mrs Parratt's defences in the present action contain the following averments:-

"In relation to the fourth paragraph of the Heads of Agreement document, discussion about the hatch referred to therein took up the most part of the discussions between the defender and her counsel on the day of the proof diet in August 2000. The defender instructed her counsel to agree that she would pay for the installation of a hatch in the pursuers' property up to a maximum cost to her of £500, being the figure which the expert witnesses present and waiting to give evidence to the parties estimated would be the cost involved. The fourth paragraph of the Heads of Agreement does not reflect the limit on the defender's liability which her counsel was instructed to insist upon on her behalf."

[63] The defences also contain a number of averments to the effect that Mrs Parratt was not shown the Heads of Agreement in draft, on 15 August 2000. However, during the evidence before me, it was a matter of agreement that Mrs Parratt was not provided with a copy of that document until several months after that date. This issue was raised during the cross-examination of Mr Mitchell by counsel for Mrs Parratt. It was put to Mr Mitchell that on 15 August 2000 he had suggested to Mr Mure that it might be a good idea for Mrs Parratt not to shown the Heads of Agreement that had been drafted. Mr Mitchell stated that he was surprised at the suggestion that he had told Mr Mure that Mrs Parratt should not be shown the document. He indicated that he had no recollection of having done so, but stated that if he had been asked whether it was necessary for Mrs Parratt to see the document, he would probably have said 'No'.

[64] Mr Mure recalled a conversation with Mr Mitchell on 15 August 2000 as to whether a copy of the Heads of Agreement should be given to Mrs Parratt. He recalled Mr Mitchell asking him to say to Mrs Parratt's solicitors that she should not be shown a copy of the document. Mr Mure had understood that Mr Mitchell's concern related to the 'fragility' of the deal that had been reached. Mr Mure indicated that he strongly understood Mr Mitchell's concern, which was a concern that Mrs Parratt might go back on the agreement that had been reached. Mr Mure indicated that he was not particularly surprised at what Mr Mitchell had requested.

[65] I prefer Mr Mure's recollection of his discussions with Mr Mitchell on this issue. I am satisfied that on 15 August 2000 Mr Mitchell did say something to Mr Mure to the effect that Mrs Parratt should not be shown a copy of the Heads of Agreement. In my opinion, Mr Mure's evidence, that he had understood Mr Mitchell's concern and had not been surprised at what Mr Mitchell had said, is consistent with other evidence given by Mr Mure to the effect that he considered an agreement had been reached and that the agreement had been recorded in the Heads of Agreement. In the event, Mr Macpherson first provided Mrs Parratt with a copy of the Heads of Agreement in January 2001.

[66] On the basis of the evidence that I have heard, I have found it difficult to form a full picture of what happened during the consultation held on the afternoon of Monday 14 August 2000. There are a variety of reasons why that is so. As I have indicated, the representatives of Simpson & Marwick, who were present at the consultation, did not give evidence. Those solicitors were Mrs Shaw, an experienced litigation partner of that firm, and an unnamed assistant. I assume that the solicitors present would have taken notes during the consultation and that a file note would have been created. I cannot, of course, speculate as to the terms of any such notes. All I can do is observe that evidence from those solicitors, informed by any notes that they might have taken, could well have cast some light on the detail of what was discussed and decided during the course of that consultation.

[67] Mr Mitchell clearly had a limited recollection of what took place during the consultation. Presumably that was why he was asked comparatively few questions about the detail of what had been discussed during the consultation. Furthermore, as I have already indicated, Mr Mitchell had no recollection of Mr Thomson having put detailed settlement proposals to him, in advance of the consultation taking place. Mr Mure's recollection of the consultation was even more limited. Any notes he may have taken during the consultation were not produced.

[68] On the other hand, Mrs Parratt gave evidence that the consultation had been convened because Mr Mitchell had settlement proposals to put to her. Mrs Parratt recollected Mr Thomson's proposals for settlement being discussed during the consultation. As I have already indicated, the proposals Mr Thomson placed before Mr Mitchell, on the Friday before the consultation, had included the granting of two servitude rights in favour of Ceiling Décor. However, in her evidence, Mrs Parratt stated that the granting of servitude rights was not mentioned during the consultation. She maintained that no mechanism had been discussed as to the means by which it was proposed that Ceiling Décor would become entitled to enjoy the various uses of the stair that they thought. She had merely presumed that Ceiling Décor would be seeking servitude rights, in respect of the various types of use of the stairway that they were seeking. I found that particular part of Mrs Parratt's evidence difficult to accept. If it were accurate, it would mean that Mr Mitchell had not fully communicated Mr Thomson's proposals to those in attendance at the consultation. It is difficult to imagine why he should have failed to do so or should have refrained from doing so.

[69] Standing the terms of Ceiling Décor's conclusions in the earlier action, the fact that several days of proof had already taken place and that further days of proof were planned, I consider it unlikely that Mr Mitchell would have failed to explain that the proposals put forward by Mr Thomson involved Mrs Parratt granting servitude rights. Moreover, even if Mr Mitchell had refrained from making that clear, I consider it likely that Mrs Parratt and her solicitors would have sought to clarify whether Ceiling Décor were proposing that servitude rights be granted by her. Mrs Parratt and Dr Parratt obviously has a considerable knowledge about and interest in the litigation in which Mrs Parratt was involved.

[70] It appears clear that the consultation became heated. Mr Mitchell attributed that to the fact that both Dr and Mrs Parratt were in a state of distress, about the rising costs of the litigation. His recollection was that whilst Dr and Mrs Parratt remained "hawkish", as to the prospects of success, they had indicated that the financial burden on them was making it impossible for them to continue. Mr Mitchell's recollection was that during the consultation Dr and Mrs Parratt had not been prepared to make any concession to Ceiling Décor, about the use of the stairway for fire escape purposes or the use of the hatchway at the top of the stairway for access to the roof. Accordingly, at the conclusion of the consultation his view had been that the continued proof would require to proceed.

[71] Mrs Parratt, for her part, gave evidence that during the consultation she had told Mr Mitchell that Ceiling Décor's proposals were unacceptable, even the proposal that a declarator of ownership of the stairway should be granted in her favour. She explained that she had rejected such a declarator, because it would have been subject to restrictions.

[72] Against the background of the averments on Mrs Parratt's behalf, which I have quoted, and the outcome of the consultation on 14 August 2000, I turn to consider the evidence given by Mrs Parratt and her husband about the events of 15 August 2000. Mrs Parratt gave evidence that when she had arrived at Parliament House that day, she, Dr Parratt and their son had gone first to the Octagonal Room. They had spent some time there, before going back up to Parliament Hall. She stated that the discussion in the Octagonal Room had been with Mr Mitchell. At one stage during her evidence, Mrs Parratt was adamant that whilst they had been in the Octagonal Room there had been no discussion at all about her granting a servitude right of access in favour of Ceiling Décor. According to her, the discussion at that time had been limited to the problem of obtaining insurance cover for the use of the stairway as a fire escape and about the need for Ceiling Décor to upgrade the internal stairway in their own building, in order to provide a fire escape for their customers. Mrs Parratt was adamant that she had made it clear to Mr Mitchell that she was only prepared to allow Ceiling Décor to continue using the stairway on a temporary basis, whilst Ceiling Décor's internal stair was upgraded. She indicated that she had encouraged Mr Mitchell to renew an offer along those lines, which she said had been made at an earlier stage in the litigation. She said that she had also indicated that she would be prepared to make further concession on the question of expenses, in order to make the offer more acceptable to Ceiling Décor. However, at a later stage in her evidence, Mrs Parratt did agree that there had been some discussion in the Octagonal Room about the possibility of her granting a servitude right of access.

[73] Dr Parratt gave evidence to similar effect as to the discussions with Mr Mitchell and indicated, as his wife had done, that Mr Mitchell had been asked to make such an offer to Ceiling Décor. The giving of instructions to make such an offer had not been raised with Mr Mitchell, during the course of his cross-examination by counsel for Mrs Parratt. Furthermore, I heard no evidence from any of the counsel involved in the negotiations on 15 August 2000 that such an offer had been mooted, let alone formally made. That was one of a number of instances in which evidence given by Mrs Parratt had not been put to the witnesses called on behalf of Ceiling Décor.

[74] I accept the submission of counsel for Mrs Parratt that it is not necessary for a cross-examiner to anticipate every detail of what a subsequent witness may say and put such detail to earlier witnesses. However, when lines of evidence, which have never been touched on with earlier witnesses, emerge from subsequent witnesses, that may cast doubt on the credibility and reliability of the evidence given by the subsequent witnesses. It can also be relevant to the question of what reliance should be placed on the subsequent evidence. That is particularly the position when the subsequent witness has sat through the earlier evidence, as Mrs Parratt had done throughout Ceiling Décor's proof.

[75] Mrs Parratt indicated that once Mr Mitchell, her husband, her son and herself had moved upstairs to the Parliament Hall, they had been rejoined by Mr Mure and Mr Macpherson. In the Parliament Hall, Mr Mitchell had informed them that the other side also wished to address the matter of the hatch. There had then ensued some discussions about the making of a hatch within Ceiling Décor's own premises. Mrs Parratt had indicated that she had received some advice as to the likely cost, £500, from a witness who was present to give evidence during the continued proof. Having received that advice, she had agreed to install the hatch at her own expense. Mrs Parratt maintained there had been no discussion about the possibility of Ceiling Décor using the hatch at the top of the stairway.

[76] Mrs Parratt went on to indicate that it was only after the hatch had been discussed that Mr Mitchell had said anything further about the use of the stairway as a fire exit. Her initial recollection was it was then, for the first time, that Mr Mitchell had referred to Ceiling Décor's right to use the stairway as being a servitude right. Mrs Parratt stated that she had immediately told Mr Mitchell that was not what had been put forward by him in the Octagonal Room, where all that had been referred to had been the continuation of the existing right to use the stairway as a fire exit, pending the upgrading of the internal stair within Ceiling Décor's own premises. As I have indicated, however, at a later stage in her evidence, Mrs Parratt agreed that there had been some mention of a servitude right, whilst they had been in the Octagonal Room. She was adamant, however, that in the Parliament Hall, she had told Mr Mitchell she was not proposing that she should grant a servitude right and had also addressed what she described as the "legal question", namely that such a right would not fall within a recognised type of servitude. She maintained that by this stage Mr Mitchell was very agitated and would not listen to what she was saying to him. She confirmed that Mr Mure and Mr Macpherson had both been present at this point of the discussions.

[77] Mrs Parratt indicated that after Mr Mitchell, Mr Mure and Mr Macpherson had left, it had struck her that there might be some confusion or misunderstanding between Mr Mitchell and herself. She stated that her son had shared her view. According to Mrs Parratt her son had insisted that she tell Mr Mitchell that he was mistaken. She said that her son had taken her to Lord Bonomy's courtroom, where she had found Mr Mitchell sitting at the back of the court. She said that she had approached Mr Mitchell and said to him, "Mr Mitchell, it's not a servitude". According to her, Mr Mitchell had replied "For goodness sake Mrs Parratt, go away." She said that her son had not entered the courtroom with her. She said she thought Mr Mure and Mr Macpherson had been in the courtroom at the time, but she did not recall precisely where. Thereafter she had left the courtroom and returned to the Parliament Hall. Mr Macpherson had subsequently taken her, her husband and her son back to Lord Bonomy's courtroom, for the second hearing. Mrs Parratt did not suggest that she had spoken to Mr Macpherson that day about her confrontation with Mr Mitchell. Indeed, after the hearing before Lord Bonomy had been concluded, Mrs Parratt does not appear to have any further substantive discussions with any of Mr Mitchell, Mr Mure and Mr Macpherson.

[78] In his evidence, Dr Parratt also described what had happened once he and his wife had moved up from the Octagonal Room into the Parliament Hall. He recalled some discussion about the installation of a hatch in Ceiling Décor's premises. He thought that discussion had gone on for as long as an hour. He recalled his wife saying that she would pay for a hatch to be installed in Ceiling Décor's premises and the figure of £500 being mentioned. Dr Parratt gave evidence that after the hatch had been discussed, Mr Mitchell had then stated to his wife that as far as the fire exit is concerned she would grant a servitude, to which his wife had said, "It's not a servitude". However, he subsequently explained that he had been told what had been said, by his son, David Parratt. By this stage, according to Dr Parratt, he and Mr Mitchell had had words, during which he had been told by Mr Mitchell that he was not a lawyer and that he should keep quiet. Following that exchange Dr Parratt had moved away. During the last ten to fifteen minutes before Mr Mitchell, Mr Mure and Mr Macpherson left to go to Lord Bonomy's courtroom, Dr Parratt does not appear to have been a party to the continuing discussions between Mr Mitchell and his wife

[79] When Mr Mitchell gave evidence, counsel for Ceiling Décor put to Mr Mitchell certain parts of the averments in the Defences, which I have quoted. Mr Mitchell denied the allegations as to what happened in Parliament Hall and in Lord Bonomy's courtroom, before the Court convened for a second time. Mr Mitchell explained that Ceiling Décor's requirement, that they should be granted a servitude right of access to use the stair as a fire escape, was central to Ceiling Décor's proposals for settlement. He was quite adamant that he had discussed that with Mrs Parratt on Tuesday 15 August 2000. Indeed he stated that the word 'servitude' would have been mentioned on numerous occasions, during the discussions with Mrs Parratt, and that Mrs Parratt had been adamant that the servitude should only be for fire escape purposes. He stated that Mrs Parratt had taken no exception to granting such a servitude, provided that insurance cover could be arranged. During his evidence, Mr Mitchell also spoke of the discussions he had had with Mrs Parratt about the subject matter of Paras.2, 4 and 5 of the Heads of Agreement. Para.1 obviously referred to Mrs Parratt's first conclusion in the Summons in the earlier action, which Mr Mitchell had been instructed to pursue.

[80] During cross-examination of Mr Mitchell it was suggested to him that there might have been some confusion between Mrs Parratt and himself, on the basis that he had been discussing matters on the understanding that a servitude right of access would be granted, whilst Mrs Parratt had thought that they were talking about a continuation of the existing state of affairs. Mr Mitchell rejected the possibility of there having been any such confusion.

[81] When Mr Mure gave evidence he confirmed that he had not been involved in the discussions in the Octagonal Room. He had, however, been present in the Parliament Hall, whilst discussions with Mrs Parratt and Ceiling Décor's counsel had continued. Mr Mure confirmed that the Heads of Agreement, which he had drafted, had been based on his understanding of what had been agreed. He did not think that the Heads of Agreement would have been drafted by him, in the terms that they were, had Mrs Parratt never given Mr Mitchell instructions to agree on her behalf to the granting of a deed of servitude of access to allow use of the stairway as a fire escape. Mr Mure said that he had no real doubt that the granting of a deed of servitude had been discussed with and agreed to by Mrs Parratt. Whilst he described the agreement that had been reached between counsel as being "fragile", he did not think it probable that there had been any confusion that morning between Mr Mitchell and Mrs Parratt. He had no recollection of Mrs Parratt having made it clear to Mr Mitchell that morning, whether in Parliament Hall or in Lord Bonomy's courtroom, that she was only prepared to grant a personal right in favour of Ceiling Décor to allow the use of the stairway as a fire escape.

[82] Mr Macpherson gave evidence of having been present in Parliament Hall during the discussions involving Dr and Mrs Parratt, Mr Mitchell and Mr Mure. He recalled Mrs Parratt having been reluctant to grant a deed of servitude, because she believed that such a class of servitude did not exist and that it was not possible to give Ceiling Décor the servitude they sought. Mr Macpherson said, however, that Mrs Parratt had ultimately agreed to do so. He recalled Mrs Parratt having been fairly agitated that morning. He recalled her having been under some pressure from her husband not to compromise the action. He recalled Mr Mitchell and Dr Parratt having had an argument as to whether or not to settle the case.

[83] I have already mentioned the letter that Mr Macpherson wrote to Mrs Parratt on 21 August 2000. According to Mr Macpherson, Mrs Parratt never responded to that letter by indicating that she had not agreed to grant a deed of servitude. During the course of his cross-examination, his evidence to that effect was not challenged, When the terms of the letter of 21 August 2000 were put to Mrs Parratt, she stated that she had not scrutinised the letter, when she had received it. She said that she would have 'registered' the paragraph dealing with the servitude right of access. She stated that the paragraph recorded 'roughly what I thought had happened'. She said that she knew in her own mind what had happened, when settlement had been discussed, and that there seemed to have been an inability on Mr Macpherson's part to understand that the right Ceiling Décor was to get was not a servitude right. Mrs Parratt maintained that, on receipt of the letter, she had telephoned Mr Macpherson. She said that she had asked him to confirm that her understanding of the position was correct, namely that the other side had been looking for a lease, not a deed of servitude, and that she had never agreed to grant a deed of servitude. She gave evidence that Mr Macpherson had done so. It was never put to Mr Macpherson that any such telephone conversation took place. I do not accept Mrs Parratt's evidence that it did.

[84] Mr Macpherson's evidence that Mrs Parratt did not, on receipt of his letter of 21 August 2000, challenge its terms, is entirely consistent with the terms of a further letter, dated 8 September 2000, which he wrote to Mr Mure (No.7/8 of process) and the terms of his file notes dated 15 September 2000 and 19 September 2000 (Nos.7/9 and 7/10 of process). The letter of 8 September 2000 dealt with the hand-written alterations to Para.3 of the Heads of Agreement, which had been incorporated into the version of the Heads of Agreement that was initialled by counsel (No.6/2 of Process). The letter explicitly referred to the granting of a servitude right of access. The file notes relate to various telephone conversations, which Mr Macpherson had with Mrs Parratt, Mr MacIntosh and Mr Mure. In particular the file note dated 19 September 2000 records some discussions between Mr Macpherson and Mr Mure about the terms of the proposed servitude right. The file note does not contain any suggestion that Mrs Parratt was contending that, under no circumstances, would she grant a servitude right in favour of Ceiling Décor. Likewise Mr Macpherson's file note of 4 October 2000 (No.7/11 of process), which covers (i) the By Order hearing that took place that day, (ii) a discussion between Mr Macpherson and Mr Mure and (iii) a telephone conversation between Mr Macpherson and Mrs Parratt, appears to proceed on the basis that Mrs Parratt had agreed that, subject to the question of insurance, she would consent to grant a servitude right in favour of Ceiling Décor, to enable the stairway to be used as a fire escape. Those documents contain no indication that Mrs Parratt was disputing that if insurance cover could be arranged, she would require to grant such a servitude right in favour of Ceiling Décor. In my opinion it is inconceivable that Mr Macpherson would have framed those file notes, in the terms that he did, if Mrs Parratt had immediately responded to receipt of his letter of 21 August 2000 to the effect that she had not agreed to grant a servitude right of access and would not do so.

[85] Furthermore, following upon receipt of the letter of 21 August 2000, it appears that Mrs Parratt took steps to investigate the insurance position, as she had been advised to do by Mr Mitchell. Her efforts appear to have been productive. By 1 December 2000, Simpson & Marwick were able to write to Ceiling Décor's Edinburgh solicitors to the effect that there was no problem relating to insurance.

[86] Around the same time, namely the beginning of December 2000, Mrs Parratt produced a draft lease, as opposed to a draft deed of servitude, for onward transmission to Ceiling Décor's Edinburgh solicitors. At this stage, Mrs Parratt appears to have returned to her concerns about granting a deed of servitude, on the basis that the right that was sought could not competently be conveyed by way of a deed of servitude.

[87] At the By Order hearing on 13 December 2000, Lord Bonomy was informed by counsel that there was a divergence of opinion as to how the necessary conveyancing was to be achieved. Subsequently, at a meeting with Mr Macpherson, on 24 January 2001, at which her son was also present, Mrs Parratt informed Mr Macpherson that under no circumstances was she prepared to agree to the granting a deed of servitude to the defenders.

[88] By 24 January 2001 the discussions between the parties relating to the installation of a hatch in the roof of Ceiling Décor's premises had also run into difficulty. Stalemate had been reached. I did not hear detailed evidence as to why that occurred. For that reason I make no comment as to where responsibility may lie for the situation that developed. Suffice it to say that by January 2001, if not some weeks earlier, it had become clear that the installation of a hatch in the roof of Ceiling Décor's premises, in accordance with the terms of Para.4 of the Heads of Agreement, was unlikely to take place.

[89] In the event, during the By Order hearing before Lord Carloway on 9 February 2001, the Court was informed that the settlement, which had been anticipated on 15 August 2000, had not happened and that the case would require to be continued for a further diet of proof. Subsequently at a further By Order hearing before Lord Bonomy on 15 February 2001, a continued diet of proof was fixed on 9 October 2001 and the following days.

[90] As I have already summarised, on the morning of 15 August 2000, Mr Mitchell had a number of conversations with Mrs Parratt, during most of which Dr Parratt was also present. Mr Mure and Mr Macpherson were present during certain of these discussions, but there were occasions when Mr Mitchell was on his own with Mrs Parratt and her husband. There is clearly a considerable conflict between the evidence given by Mr Mitchell and that given by Dr and Mrs Parratt.

[91] Having carefully considered all the evidence placed before me, I am reached the conclusion that in negotiating the agreement that was subsequently incorporated in the Heads of Agreement, Mr Mitchell did not act without instructions or contrary to instructions. I am satisfied, on the basis of the evidence I heard and the documentary evidence referred to by the witnesses, that during his discussions with Mrs Parratt, Mr Mitchell obtained instructions to agree to all the matters that were subsequently incorporated in the Heads of Agreement. The legal consequences of the agreement reached I will turn to deal with in due course, but on the factual issue of whether he had received instructions to enter into such agreement, I am satisfied that Mrs Parratt authorised Mr Mitchell to proceed in the manner that he did. I am not persuaded that there was any confusion between them on the matters that were agreed between Mr Mitchell and Mr Thomson and then set out in Heads of Agreement.

[92] In particular, I accept Mr Mitchell's evidence that, subject to the question of insurance, Mrs Parratt did agree to grant a servitude right of access to enable the stairway to be used for fire escape purposes and did not insist on the alternative of a lease. She may well have been reluctant to do so. She may well have had doubts as to the competency of doing so. Mr Mitchell may well have given her very firm advice to do so. Dr Parratt may not have wanted his wife to do so. But I accept Mr Mitchell's evidence that Mrs Parratt did authorise him to do so and indeed that she authorised him to agree to all of the elements of that were agreed and set out in the Heads of Agreement.

[93] In reaching those conclusions I have taken into account, by way of background, the evidence that I heard, and accept, as to the manner in which the negotiations between Mr Mitchell and Mr Thomson developed, during the course of the morning of 15 August 2000. That evidence included Mr Thomson being informed that Mrs Parratt was agreeable in principle to granting a servitude right of access to enable the stairway to be used as a fire escape, that the availability of insurance cover was the only problem to the use of the stairway as a fire escape, that Mrs Parratt wished to put forward detailed proposals about creating a hatch in Ceiling Décor's property and that she had no objection to a finding of no expenses due to or by either party.

[94] Likewise I consider it to be of significance that during the evidence I heard about the negotiations between Mr Mitchell and Mr Thomson, there was no suggestion that either counsel had discussed the possibility of Mrs Parratt granting a lease in favour of Ceiling Décor, let alone the possible terms and duration of any such lease. I need not repeat what I have already summarised as to the history of those negotiations. All I need indicate is that in my opinion that chapter of evidence has some bearing on my assessment of the issues that undoubtedly arise as to the credibility and reliability of Mr Mitchell's evidence, about his dealings with Mrs Parratt and, to a lesser extent, with Dr Parratt. In my opinion, it is highly improbable that an experienced senior counsel, such a Mr Mitchell, would conduct detailed negotiations covering a number of topics, without having discussed with his client the nature of any proposals being advanced or to responded to. It must also be borne in mind, of course, that during the morning of 15 August 2000, Mr Mitchell required to respond to proposals for settlement that had been put forward by Mr Thomson and that those proposals had included, in quite explicit and unequivocal terms, the proposal that Mrs Parratt would grant a servitude right of access in favour of Ceiling Décor that would enable the stairway to be used as a fire escape for Ceiling Décor's premises.

[95] I take full account of the submission made by counsel for Mrs Parratt that in the present action Ceiling Décor are unable to point to clear evidence that at one specific and identifiable point (or indeed number of points), Mrs Parratt explicitly authorised Mr Mitchell to conclude an agreement in the precise terms that he did. However, in the context of extensive negotiations between counsel and detailed discussions between counsel and their respective clients, of the nature that took place on 15 August 2000, one would not necessarily expect to hear evidence of such a precise nature. For that reason, I do not find it surprising that in the present action, Ceiling Décor seek to rely on the totality of the evidence before me.

[96] A further factor to be borne in mind is the cost of the proceedings before Lord Bonomy. Four days of proof had taken place. A further eight days were scheduled. It was by no means certain that the continued diet would be sufficient to conclude the proof. Against that background it would be hardly surprising if counsel on both sides of the case were exploring with their respective clients the basis upon which the earlier action might be settled. It would be very unusual for such an exercise to be concluded by experienced counsel, without their having put to their respective clients the proposals and counter proposals that had emerged from the other side of the case.

[97] I have, of course, taken account of the fact that Mr Mitchell's recollection of events was far from complete. There were, in fact, significant gaps in his recollection of what took place at the consultation on 14 August 2000. Like other witnesses he had difficulty in recalling the precise chronology of events and the full details of the events on 15 August 2000. But when Mr Mitchell gave his evidence I had no impression that he was deliberately seeking to reconstruct the events of 15 August 2000. On the contrary, he readily admitted that there gaps in what he could remember. Had Mr Mitchell's evidence stood alone, it might have been more difficult for Ceiling Décor to have established what took place, during the morning of 15 August 2000. However, Mr Mitchell's evidence does not stand alone.

[98] In considering Mr Mitchell's evidence about what happened that morning, I place reliance on the evidence of Mr Mure and Mr Macpherson. I found both of them to be credible and reliable witnesses, albeit that, like Mr Mitchell, neither of them claimed that their recollection of events was complete. Without rehearsing the full detail of their evidence, it is quite clear that a lot of what Mrs Parratt said in evidence is inconsistent with what Mr Mure and Mr Macpherson saw and heard on the morning of 15 August 2000. Mrs Parratt's evidence is also inconsistent with what they did, in Mr Mure's case in drafting the Heads of Agreement and in Mr Macpherson's case in drafting and sending out his letter of 24 August 2000. Mr Mure had no real doubt that a deed of servitude for fire escape purposes was discussed and agreed during the discussions between Mr Mitchell and Mrs Parratt. Although he indicated that Mrs Parratt was under pressure that morning, Mr Mure did not think it at all probable that there had been any confusion between Mr Mitchell and Mrs Parratt.

[99] In my opinion it is inconceivable that Mr Mure would have gone along with the drafting of Heads of Agreement, and the discharge of the continued diet of proof, if he had had the slightest inclination that the agreement that was to be incorporated in those Heads of Agreement had not been authorised by Mrs Parratt and was contrary to her instructions. The more complicated the situation was, the more fraught the relationship between Mrs Parratt and Mr Mitchell may have become, the more unlikely it would have been that Mr Mure would have stood aside and then agreed to draft a document, recording the existence of an agreement that he was not satisfied had been authorised by Mrs Parratt. In these circumstances both the evidence given by Mr Mure and his actings that morning provide strong support for the evidence of Mr Mitchell that as far as the question of a deed of servitude is concerned he obtained instructions from Mrs Parratt to agree to that as one element of an overall settlement of the earlier action.

[100] I also place reliance on the fact that I have reached the view that on receipt of Mr Macpherson's letter of 24 August 200, Mrs Parratt did not contact Mr Macpherson and challenge the accuracy of what he had written. As I have indicated, Mrs Parratt's evidence that she did so is inconsistent with the terms of the documentation subsequently created by Mr Macpherson, to which I have already referred. Indeed the documents lodged by both parties suggest that it was only around late November or early December 2000 that the view began to emerge that the action was not going to settle and that a continued diet of proof would be necessary.

[101] Reaching the conclusions I have involves my preferring the evidence of Mr Mitchell to that of Mrs Parratt and Dr Parratt. I do so having found it necessary to give very careful consideration to the credibility and reliability of the evidence given by Mr Mitchell on the one side and that of Mrs Parratt and Dr Parratt on the other. Contrary to the submissions made by counsel for Mrs Parratt, I do not consider that there is any way I can decide the factual issues that are before me without addressing whether Mr Mitchell gave credible and reliable evidence when he was describing his dealings with Mrs Parratt on 15 August 2000.

[102] In undertaking that exercise, a number of other factors are of relevance. Mrs Parratt is a qualified solicitor engaged in general practice, including conveyancing. Whatever views she holds as to the competency, validity and necessary terms of a deed of servitude for fire escape purposes, Mrs Parratt is well aware what a servitude right is. In those circumstances, there was, on 15 August 2000, no need for Mr Mitchell to discuss with Mrs Parratt what a deed of servitude involved. The fact that he did not do so is hardly surprising. Moreover, Mrs Parratt's legal knowledge and experience makes it unlikely that that she did not understand the advice she was receiving or was confused during her discussions with Mr Mitchell.

[103] Mrs Parratt was also well aware of what Ceiling Décor maintained they required by way of the use of the stairway as a fire escape. That had been the subject of consideration around the time of the raising of the earlier action and when that action first went to proof before Lord Bonomy. When the earlier action was raised, the interim interdict that Mrs Parratt sought and obtained had not precluded Ceiling Décor from continuing to use the stairway as a fire escape. The interim interdict thus took account of the fact that the stairway had been used as a fire escape by Ceiling Décor's predecessors and by Ceiling Décor themselves. Over that period, fire certificates had been issued by the local fire authority, on the basis that the stairway could be used as a fire escape. It was against that background Mrs Parratt had given the undertakings on 26 April 1996 to which I have already referred.

[104] It may well be that the discussions between Mr Mitchell and Mr Thomson on the one hand, and between Mr Mitchell and Mrs Parratt, on the other, could have been carried out in a more structured manner. Indeed, it clearly would have been preferable if the parties could have met some days, if not some weeks, before the continued diet of proof, without any pressure of time on them. The practice of last minute discussions amongst counsel and between counsel and their respective clients requiring to take place in corners of Parliament House is not entirely satisfactory. The lack of privacy involved and the problems of keeping adequate written records of such discussions are clearly significant. However, that is currently what happens, on a regular basis, and experience has demonstrated that complicated cases are resolved "at the door of the court", in such an environment and, in many instances, under considerable pressures of time.

[105] Clearly the relations between Mr Mitchell and Dr and Mrs Parratt became difficult. Leaving aside what Dr and Mrs Parratt said on that matter, Mr Mure's evidence is also of relevance. However the fact that voices may have been raised or that advice may have been given forcefully, and in terms which Dr and Mrs Parratt may not have welcomed, does not necessarily point to a situation in which a major misunderstanding would arise. On the contrary, one might expect that, in such circumstances, everyone would be quite clear what was being said.

[106] On the basis of the evidence I heard, I am not satisfied that Mrs Parratt was unaware of or under any state of confusion as to the nature of the right that Ceiling Décor were insisting upon, as far as the use of the stairway as a fire escape was concerned. In assessing that suggestion I also bear in mind the admission made in Answer 2 of Mrs Parratt's defences that Mr Mitchell had discussed settlement proposals with her and had discussed the possibility of the grant by her of a deed of servitude and the further averments in Answer 5 to the effect that on three distinct occasions Mrs Parratt had indicated that she was not willing to consider granting a servitude right of a property owned by her and that she would only grant a limited personal right of egress. The terms of the admission in Answer 2 are difficult to square with the suggestion of confusion. The averments in Answer 5, whether or not they are factually correct, are hardly consistent with the suggestion made during the course of the proof before me that for some reason or another Mrs Parratt was labouring under the misapprehension that all Ceiling Décor were seeking was a personal right to use the stairway.

[107] As far as the discussions in the Octagonal Room were concerned, I consider that Mrs Parratt's concern about insurance cover is only understandable on the basis that she was responding to the proposal by Ceiling Décor that they be granted a deed of servitude, as one part of an overall settlement of the action. The availability of insurance cover had not created any difficulty in the use of the stairway as a fire escape, which Mrs Parratt had undertaken to permit, after the earlier action was raised. Likewise, the discussions about Mrs Parratt installing a hatch in Ceiling Décor's own premises are only understandable as being a response to another of Ceiling Décor's proposals

[108] On the basis of the evidence I have heard, I have little doubt that during the discussions that morning Mr Mitchell may well have mentioned to Mrs Parratt that were a servitude right of access to be granted by her, the actual use of the stairway in the future would be similar to that currently taking place in terms of the undertaking that she had given. However the suggested basis of an misunderstanding between Mr Mitchell and Mrs Parratt, namely that Mr Mitchell thought he was talking about a servitude right of access, whilst Mrs Parratt thought she was talking about the continuation of a personal right for a limited period of time, I find impossible to reconcile with the evidence that Mrs Parratt actually gave and with the concerns Mrs Parratt undoubtedly raised with Mr Mitchell, as to whether a deed of servitude for fire escape purposes could competently be granted and as to whether insurance was available against the risks inherent in the exercise of rights in terms of such a servitude. The first of these concerns would not have arisen, if all that Mrs Parratt had thought she was being asked to agree to was an extension of a personal right for Ceiling Décor. Such a misunderstanding is also very difficult, if not impossible, to reconcile with Mr Mitchell's evidence, which I believed, that Mrs Parratt was insistent that it be part of any agreement that if insurance cover was not available she would not be bound to grant a deed of servitude. That was a point that is expressly reflected in the last two lines of Para.3 of the Heads of Agreement.

[109] As far as the evidence given by Mrs Parratt was concerned, I found her evidence unsatisfactory in a number of other respects. She gave the impression of being obsessed not just with the litigation, but with the correctness of her position. In giving evidence, she sought to argue her case, rather than restrict herself to answering the questions that she had been asked. On certain occasions she did not listen to the detail of the question she was being asked, before volunteering her answer. On other occasions, she failed to give appropriate answers to questions that raised factual issues of potential difficulty for her. Furthermore, there were a number of instances in which she gave evidence that had never been raised with the witnesses called by Ceiling Décor or was inconsistent with the line that had been taken in cross-examination of such witnesses.

[110] I did not believe Mrs Parratt's evidence about what she alleges happened in Lord Bonomy's courtroom, before Lord Bonomy came on to the bench for a second time. David Parratt was not called to give evidence. Mr Mitchell denied that any such incident took place. If it had done, it would, in my opinion, be inconceivable that Mr Mitchell would have forgotten about it. Accordingly the particular conflict between the evidence of Mr Mitchell and Mrs Parratt is not a question of reliability. It involves an issue of credibility. Leaving aside the fact that counsel for Mrs Parratt stated quite explicitly that he was not challenging Mr Mitchell's credibility, there are a number of factors that suggest that Mr Mitchell's evidence as to this alleged incident is to be believed.

[111] First of all it is, in my opinion, very unlikely indeed that Mr Mitchell would have done nothing, had such an incident had occurred. Mr Mitchell had been acting for Mrs Parratt for some time. If she had spoken to him, in the terms she maintains that she did, Mr Mitchell could not possibly have thought that would be an end of the matter. He knew Mrs Parratt to be a solicitor. He knew that she felt very strongly about the litigation in which she was involved. He knew that Dr Parratt and David Parratt are both professional men. Against that background, any experienced lawyer is likely to have considered that there would be immediate repercussions were such an incident to be ignored. In my opinion, had such an incident taken place, Mr Mitchell's immediate reaction would have been to speak to Mr Macpherson and Mr Mure, and possibly also to Mr Thomson. No doubt Lord Bonomy would be anxious to convene the Court to enquire what the current position was, but the imminence of such a hearing would have been unlikely to have caused an experienced senior counsel to ignore an incident such as Mrs Parratt spoke to.

[112] Secondly, and much more importantly, there is no support for Mrs Parratt's evidence on this matter. None of the witnesses who gave evidence, and who had been congregating for a second hearing before Lord Bonomy, saw anything that provided any support whatsoever for Mrs Parratt's account of events. Furthermore, as I have already indicated, David Parratt was not called to give evidence.

[113] Thirdly, and very significantly, if Mrs Parratt had approached Mr Mitchell and spoken to him, in the terms that she claimed, and if Mr Mitchell had then dismissed her comments, in the terms she alleges, the question arises as to why Mrs Parratt did not immediately speak to Mr Macpherson, the solicitor who had been acting for her for some considerable period of time. Having heard and seen Mrs Parratt giving evidence, I do not consider that she would have felt at all inhibited in speaking to Mr Macpherson, had Mr Mitchell addressed her in the manner she described.

[114] I should also make clear that I did not believe Dr Parratt's evidence, when it was in conflict with that given by Mr Mitchell about the issue of the grant of a servitude right of access to use the stairway as a fire escape. No doubt relations between the two of them were difficult. It is quite possible that Dr Parratt may have been less inclined to compromise the action than his wife was. But insofar as Dr Parratt's evidence suggests that Mr Mitchell did not seek and obtain instructions from Mrs Parratt about how granting a right of servitude in favour of Ceiling Décor, in the event that suitable insurance cover could be arranged, I reject it.

[115] When giving evidence about his discussions with Mr Thomson, on the morning of 15 August 2000, Mr Mitchell recollected "the breakthrough" as being when Mrs Parratt had come up with a proposal that she might pay for the cost of installing a hatch in the roof of Ceiling Décor's premises. He indicated that that reflected a marked change in her attitude from the consultation the previous afternoon. He did, however, resist the suggestion put to him during cross-examination by Mrs Parratt's counsel that otherwise the focus of his discussions with Mrs Parratt had been on her willingness to continue the existing state of affairs, namely a personal right in favour of Ceiling Décor, rather than a granting of a servitude right of access to use the stair for fire escape purposes.

[116] On the basis of the evidence that I have heard, I have reached the view that it has been established that during the morning of 15 August 2000 Mr Mitchell discussed with Mrs Parratt (a) that as part of their overall proposals for seeking a settlement of the action, Ceiling Décor were insisting upon a servitude right to use the stairway as a fire escape for their own premises and (b) Mr Mitchell received instructions from Mrs Parratt that she would grant such a servitude as one part of an overall settlement of the action that was proceeding to proof before Lord Bonomy. I accept the evidence of Mr Mitchell that such discussions took place and that such instructions were given to him.

[117] Having carefully considered the evidence I heard, I am also satisfied that Mrs Parratt was made aware by Mr Mitchell and accepted that, as Ceiling Décor had proposed, she would be granted a decree of declarator of ownership of the stairway, as she had sought in the first conclusion of the summons in the earlier action. I am also satisfied that Mrs Parratt was made aware by Mr Mitchell that Ceiling Décor had proposed, as part of an overall settlement of the earlier action, that no further finding of expenses due to or by either party should be made and that she had indicated to Mr Mitchell that such a proposal was acceptable to her. There was, as I understood the evidence, no dispute that Mrs Parratt had authorised that, as part of an overall settlement of the case, there would be no further award of expenses due to or by either party to the action.

[118] Likewise I do not understand there to be any suggestion that Mrs Parratt did not authorise the agreement set out in paragraph 4 of the Heads of Agreement. The matters dealt with in Para.4 of the Heads of Agreement include a proposal that originated from Mrs Parratt herself. The evidence discloses that the proposal that Mrs Parratt might pay for the installation of a hatch in Ceiling Décor's roof was the subject of full discussion between Mrs Parratt and Mr Mitchell. I am quite satisfied that Mrs Parratt authorised and instructed Mr Mitchell to agree with Mr Thomson what is set out in Para.4 of the Heads of Agreement.

[119] Mr Mitchell also gave evidence that Mrs Parratt had agreed to what was set out in Para.5 of the Heads of Agreement. His evidence to that effect was not challenged. I accept it. If Mrs Parratt does not recollect that having occurred, as she claimed not to do, I do not regard that to be of significance. It is clear there was never any dispute between the parties that something should be done to prevent access being gained between the basements of the two sets of premises. Indeed, during a site inspection of the premises in Dundee, which Mr Mitchell had carried out in preparation for the proof, he had been shown the basement area of Mrs Parratt's premises and how access could be gained from that basement area into the basement area of Ceiling Décor's premises. That site visit was obviously the backdrop against which this particular matter was agreed.

[120] In the whole circumstances I am satisfied that it has been established in evidence that Mr Mitchell was given full instructions to enter into the agreement, with its various elements, that is recorded in, but not constituted by, the Heads of Agreement (No.6/2 of Process). I reject the suggestion put to Mr Mitchell that there may have been some misunderstanding between Mrs Parratt and himself as to what he was authorised to say to Mr Thomson on the issues that lie behind the agreement that was encapsulated in the Heads of Agreement. Likewise I reject the suggestion by counsel for Mrs Parratt that just because all the witnesses do not recollect precisely when and what terms Mrs Parratt agreed to the various elements of the agreement that means it has not been proved that Mrs Parratt authorised Mr Mitchell to proceed in the manner that he did.

[121] Having regard to the views I have reached as to the instructions given to Mr Mitchell, it is not necessary for me to consider the issue of whether the agreement entered into by Mr Mitchell fell within counsel's general mandate. Accordingly I do not require to deal with the authorities touching on the nature and extent of the mandates that counsel may require to effect judicial and non-judicial settlements. The authorities to which I was referred include Henry v Henry (1916) 1 S.L.T. 200, affirmed (1916) 2 S.L.T. 135, and Brodt v King 1991 S.L.T. 272. It appears to me that the agreement reached was one that was intended to cover certain matters that were not focused in the Closed Record in the earlier action. Para.4 the Heads of Agreement would arguably fall into that category and Para.5 certainly does. Indeed, under reference to a passage in the Opinion of Lord Ormidale in Henry v Henry (1916) 1 S.L.T. 28, at p.211, counsel for Mrs Parratt argued that the mandate of Mr Mitchell and Mr Mure in acting for Mrs Parratt during the proof before Lord Bonomy would not have entitled them to agree to any of the elements of the agreement set out in the Heads of Agreement.

[122] If one proceeds on the basis that the agreement counsel entered into was one which the counsel involved considered could bring about a settlement between Ceiling Décor and Mrs Parratt, then the agreement would fall to be described as constituting a non-judicial as opposed to a judicial settlement. That is why it has been necessary for me to address the question of whether Mr Mitchell had been given authority not just to seek a settlement of the action, but to conclude an agreement in the terms that are reflected in the Heads of Agreement.

[123] As I have indicated, I am satisfied that on 15 August 2000, Mrs Parratt instructed Mr Mitchell to participate in discussions with Mr Thomson. Those discussions took place for the purposes of exploring whether a settlement of the earlier action could be achieved. Those discussions took place on the morning of the continued diet of proof, in an action in which several days of proof had already been heard, in which several further days of proof would be required and in which various proposals for settlement had previously been made. The discussions took place the day after a consultation, during which Mrs Parratt, Dr Parratt and Mrs Parratt's counsel had considered the latest proposals for settlement from Ceiling Décor. Whatever those involved in the exercise of 15 August 2000 may have thought, as to whether the objective of achieving a settlement would be achieved, it is quite clear that the negotiations took place that morning with a view to exploring whether a settlement could be achieved.

[125] On the basis of the evidence I have heard and the productions placed before me, I am quite satisfied that Mrs Parratt took part in what occurred that morning in the knowledge that the possibility of achieving a settlement was being explored. Mrs Parratt was not, of course, shown any document containing the matters that had been agreed by counsel. However, I am satisfied that the subject-matter of each of the paragraphs of the Heads of Agreement was discussed with her, during the course of that morning, in some instances on more than one occasion. I am also satisfied that Mrs Parratt indicated to Mr Mitchell her willingness to accept each of the individual parts of the overall settlement of the action. For the reasons I have already set out, it is, in my opinion, highly improbable, that Mr Mitchell would have conducted the negotiations that he did with Mr Thomson or that Mr Mitchell and Mr Mure would have framed the Heads of Agreement in the terms that they did or that Mr Macpherson would have accepted delivery of a copy of the Heads of Agreement and reported to Mrs Parratt in the terms that he did on 24 August 2000, had Mrs Parratt not indicated her willingness to agree to the individual matters that are to be found in the numbered paragraphs of the Heads of Agreement.

Summary of findings on factual issues
[126] For these reasons I repel the third plea-in-law for Mrs Parratt and answer the factual issues raised in the Notes of Proposals for Further Procedure in line with the factual conclusions I have expressed. As far as Ceiling Décor's Note of Proposals is concerned, I trust that it is clear from this Opinion what my findings in fact are as to (i) What passed between counsel for the parties? and (ii) What passed between counsel and their respective clients? Put shortly, the evidence I have accepted has established that senior counsel for the two parties reached an agreement, which formed a basis for a joint application to Lord Bonomy that he should discharge the continued diet of proof. The terms of that agreement are summarised in, but not constituted by, the Heads of Agreement that were drafted and initialled by junior counsel. On the basis of the evidence that I heard, I am satisfied that both Ceiling Décor and Mrs Parratt authorised their respective senior counsel to agree to the various constituent elements of that agreement.

[127] As far as Mrs Parratt's Note of Proposals is concerned, the position is more difficult to summarise. There are a number of reasons for that, the principal of which being the terms in which Paragraph 1 of her Note of Proposals is framed. Those terms cover wider issues than those raised in Paragraph 2 of the Note of Proposals for Ceiling Décor.

[128] In seeking to summarise my findings in respect of Paragraph1 of Mrs Parratt's Note of Proposals it may help if I begin with Questions (a) - (d).

What was the extent of the instruction given by the Defender to her counsel as regards settlement of the previous action?

[129]

As far as (a) is concerned, I trust that my findings are clear. On the basis of the evidence that I heard, I am quite satisfied that on 15 August 2000 Mr Mitchell took part in negotiations with Mr Thomson during which both senior counsel were seeking to identify a basis upon which the earlier action could be settled. Whatever collateral issues may have been touched upon during the course of those negotiations, that was their primary purpose. I am perfectly satisfied Mrs Parratt was aware that was the purpose of the negotiations. She consented to Mr Mitchell taking part in those negotiations, on her behalf. To that extent Mr Mitchell was 'instructed' by Mrs Parratt to engage in negotiations, whose objective was the identification of a basis upon which the earlier action could be settled.

[130]

The evidence I have heard has established that during the course of those discussions, Mr Mitchell and Mr Thomson talked about a number of individual proposals and issues, including the proposals that had been put to Mr Mitchell by Mr Thomson prior to the consultation on Monday 14 August 2000. The proposals and issues discussed included all of the matters that are set out in five numbered paragraphs of the final version of the Heads of Agreement. On the basis of the evidence that I have heard, I am satisfied that each of the matters dealt with in the numbered paragraphs of the Heads of Agreement was discussed with Mrs Parratt by Mr Mitchell, at some stage during the course of 15 August 2000. Such discussions, of course, followed upon the discussions that had taken place during the consultation held the previous day and indeed at earlier meetings between Mrs Parratt and Mr Mitchell and her legal advisers. But on the basis of all the evidence I heard, I am satisfied that on 15 August 2000, with the focus being on seeking to identify a basis upon which the earlier action, with its competing conclusions, could be settled, Mrs Parratt gave Mr Mitchell instructions to reach agreement with Mr Thomson on the various matters referred to in the Heads of Agreement.

Did the Defender at any material time have knowledge of, or give consent to, the terms of the Heads of Agreement document?
[131]

As far as this question is concerned, there are two points I should make. The first in that it is quite clear that Mrs Parratt was completely unaware of the drafting of the Heads of Agreement on 15 August 2000. She did not become aware of the existence and terms of any version of that document until several months later. As far as her knowledge of the matters dealt with in the numbered paragraphs of that document, there is nothing that I need add to what I have set out in the immediately preceding paragraphs of this Opinion in answer to Question (a).

To what extent, if any, does or ever did the Heads of Agreement document reflect the instructions given by the Defender to her counsel?
[132]

I do not consider that it is necessary for me to add anything further to what I have said in response to Question (a).

To what extent did counsel involved in the earlier action (on each side) demonstrate or provide evidence of their intention to create legal relations based on the document?

[133] The short answer to this question is that none of the counsel instructed to appear for the parties in the continued proof on 15 August 2000 intended to create legal relations based on that document. All four of them were of the view that the Heads of Agreement merely recorded the existence and terms of an agreement that had already been entered into. The senior counsel involved clearly intended to agree what they did agree. Whether the counsel or any of them intended that the agreement entered into would 'create legal relations' is, in my opinion, of limited relevance to the question which Lord Macfadyen's interlocutor requires me to address, namely whether that agreement is a 'formally-valid agreement to settle the previous action on the basis set out in the Heads of Agreement'. And it is to that question that I should now turn.

Was there ever a formally-valid agreement between the parties?
[134] The submission of counsel for Mrs Parratt can be summarised in these terms. Any agreement entered into between the parties on 15 August 2000 is as set out in the final version of the Heads of Agreement (No.6/2 of Process). Proceeding on the basis that the agreement was entered into, before the Heads of Agreement were drafted, the terms of that agreement are as stated in the five numbered paragraphs of that document. That follows from the fact that all four of the counsel involved considered that the terms of the Heads of Agreement encapsulated what had been agreed between senior counsel for both parties.

[135] On that factual basis, counsel for Mrs Parratt sought to scrutinise the agreement against a number of well known legal principles. An agreement between two parties to enter into an agreement, in which some critical part of the subject matter is left undetermined, is not an agreement that creates legally binding obligations (see May and Butcher Ltd v The King [1934] 2 KB 17, per Lord Buckmaster at p.20, Viscount Dunedin at p.21 and Lord Warrington of Clyffe at p.22). An agreement to negotiate is not an agreement that is enforceable in law. A party who has simply agreed to negotiate binding terms is free to break off negotiations at any time. Such a party is entitled to negotiate at arms length and act in accordance with their own best interests (see Walford v Miles [1992] 2 A.C. 128, per Lord Ackner at pp.136 G - H and 138 C - G and East Anglian Electronics Ltd v OIS plc 1996 SLT 86, per Lord President Hope at p.812 E -F). Counsel for Mrs Parratt also argued that it was not for the Court to attempt to imply terms additional to those agreed between parties and thereby create legally enforceable obligations (see Scancarriers A/S v Aotearoa International Limited (The "Barrunduna" and "Tarago") [1985] 2 Lloyd's L.R. 419, at p.422). Likewise, he argued that the general principle that an agreement to agree or to negotiate is not productive of legally binding obligations applies with equal force to a situation in which parties have agreed to enter into a further form of agreement, the general features of which are familiar to the law, but the particular form and terms of which may vary from instance to instance. Reference was made to G. Scammell and Nephew Ltd. v H.C. and J.G. Ouston [1941] A.C. 251, per Viscount Simon at p.254, Viscount Maugham at pp.255 - 257, Lord Russell of Killowen at pp.260 - 261 and Lord Wright at pp.268 - 269 and 272 and to Bishop & Baxter Ltd v Anglo-Eastern Trading & Industrial Company Limited [1944] 1 K.B. 12.

[136] Under reference to those lines of authority, counsel for Mrs Parratt argued that it was clear from the terms of Para.3 of the Heads of Agreement that there would require to be further negotiations about the scope and terms of the proposed Deed of Servitude, including what was encompassed within the term 'fire escape purposes'. He did not seek to apply the lines of authority to which he had referred to in the opening sentence of Para.3, which provided that both parties would investigate, as soon as possible, the availability of third party insurance cover for the use of the stairway as a fire exit. He argued, however, that even if Mrs Parratt had authorised everything that was set out in Para.3, as far as the granting of a Deed of Servitude was concerned, what had been agreed amounted to no more than a willingness on her part to enter into detailed negotiations as to the terms of such a deed, in respect of which a number of issues arose. Those included issues such as the precise terms of the access to the stairway that was to be permitted, the holding of fire drills, the installation of locks and the availability of keys and compatibility with the requirements of the local fire authority. Counsel argued that as far as the proposed Deed of Servitude was concerned, the parties had not agreed sufficient detail to entitle the Court to hold what the terms of the Deed of Servitude should be. For example, the agreement reached did not extend to dealing with whether the requirements of the local fire authority would require to be met. The evidence I heard during the proof has indicated that during the discussions between counsel, which took place on 15 August 2000, no detailed consideration had been given as to what the term 'fire escape purposes' meant or as to the nature or mechanism for settling the terms of the proposed Deed of Servitude. It was clear that it had been understood on both sides that such details would be settled in due course. That illustrated that on this particular matter, at least, a binding agreement had not been reached. The tendering as a production in the case of an Opinion by Professor William Gordon, dated 4 June 2002, (No.6/7 of Process) commenting on the terms of a draft Deed of Servitude that had been lodged as a production on behalf of Mrs Parratt (No.7/1 of Process) did not establish the terms of a reasonable Deed of Servitude for fire escape purposes.

[137] Counsel for Mrs Parratt made similar submissions in relation to the contents of Para.4 of the Heads of Agreement. Counsel argued that the fact that Para.4 gave Mrs Parratt an 'option' to decide whether or not to create a hatch in the roof of Ceiling Décor's premises was destructive of any argument that the Heads of Agreement summarise or reflect a legally enforceable agreement. As had been explained during the course of the evidence, Mrs Parratt had decided not to proceed with and pay for the creation of such a hatch. Her reasons for having reached that decision were irrelevant, because the terms of Para.4 made it clear that the option was entirely hers. The provisions of Para.4 provide that after Mrs Parratt has been allowed access to the CD's premises she "shall then elect whether to have the ... hatch access created at her expense. In the event that (she) decides not to do so, then the parties shall agree suitable access through the present hatch at the top of the staircase within (her) subjects." Counsel for Mrs Parratt argued that was quite explicitly an agreement to agree and was not enforceable.

[138] Counsel for Mrs Parratt also founded on the fact that the counsel involved in the negotiations on 15 August 2000 had accepted that Mrs Parratt's decision on the creation of a hatch in Ceiling Décor's premises was one of the contingencies upon which the implementation of the agreement and the settlement of the principal action depended. There was no basis in the evidence or in law for regarding the issue of Ceiling Décor gaining access to the roof, through a hatch, as being severable from the other elements of the agreement. On the contrary, it was an essential element, albeit a contingent element, of the basis on which the parties had agreed to settle the principal action. As the question of the hatch had now become an unenforceable agreement to agree, the whole agreement between the parties, as set out in the Heads of Agreement, was not an agreement that could have effect as a binding settlement of the earlier action.

[139] In responding to those submissions, senior counsel for Ceiling Décor began by submitting that the argument, that any agreement entered into was not a binding agreement, had not been foreshadowed in the defences, nor had it been covered in Lord Macfadyen's interlocutor of 20 June 2002, allowing the current proof. It was the terms of the defences and that interlocutor that regulated what should be decided during this particular proof.

[140] Senior counsel for Ceiling Décor stressed that the Heads of Agreement had not constituted the agreement between the parties. The document had merely been designed to record a summary or 'the essence' of what had been agreed between senior counsel, on behalf of their respective clients. Counsel made clear that he accepted the principles to be taken from the authorities that had been cited, but stressed that in each of those authorities the facts had been different from those in the present action. Cases such as Scancarriers A/S, G. Scammel and Nephew Ltd and Bishop & Baxter Limited were concerned with factual situations in which one or more of the essentials of a binding contract was missing. That was not the situation in the present action.

[141] Senior counsel for Ceiling Décor stressed that it was important to have regard to the factual circumstances relevant to the events of 15 August 2000, together with what had happened that day. The agreement had been entered into against the background of a protracted history of litigation between the parties. The issues between them had been focussed in the Closed Record in the earlier action, which had included conclusions in the Counterclaim seeking a servitude right of access to the stairway to enable it to be used as a fire exit and a servitude right of access up the stairway and through the roof hatch, to enable access to be gained to the roof. It was important for the Court to bear in mind the 'factual matrix' against which the negotiations had taken place and in which agreement had been reached. Everyone involved knew what they were negotiating about. That explained why there was little discussion about the term 'fire escape purposes'. It had not been practical for every 'i' to be dotted and every 't' to be crossed. The Court should proceed on the assumption that the parties had been acting in good faith, during the course of the negotiations and when agreement was reached. That involved the parties agreeing that they would continue to act in good faith to give efficacy to the binding agreement, which in his submission they had reached.

[142] Senior counsel for Ceiling Décor submitted that the agreement recorded in Para.3 of the Heads of Agreement placed a binding obligation on Mrs Parratt to grant a Deed of Servitude in favour of Ceiling Décor, if satisfactory insurance cover was available to both parties, which it was. He submitted that the essential elements of an obligation to grant such a Deed of Servitude had been well understood by both parties and agreed between them. The properties involved were clearly identified, were in separate ownership and were sufficient proximate to each other. The purpose of the proposed servitude was clear and was one recognised by law. He posed the question 'Which essentials are missing?' Senior counsel submitted, under reference to Para.3 of Professor Gordon's Opinion, that once the essential requirements of a servitude right had been agreed, the detailed terms of the servitude right could be subsequently negotiated or, if necessary, implied by law.

[143] Senior counsel argued that in respect of the proposed Deed of Servitude for fire escape purposes the essentials of what was involved were quite clear. It was a statement of the obvious as to what a fire escape was and as to what the parties had agreed, as far as the use of the stairway was concerned. Ceiling Décor owned their premises. They were going to concede that Mrs Parratt owned the stairway. What had been agreed between the parties had been that, subject to the availability of suitable insurance cover, the stairway would continue to be available for use a fire escape, in the event of a fire, by those who might seek to escape from the premises, currently owned by Ceiling Décor. Those were the essential elements of a servitude right for fire escape purposes. Issues such as agreeing that the stairway could continue to be designated as a fire escape by the local fire authority, that Ceiling Décor's use of the stairway could be such as would enable them to comply with the terms of the local fire authority's fire certificate and the nature of the locks that may require to be installed were not essential elements of a servitude right for fire escape purposes.

[144] As for as the terms of Para.4 of the Heads of Agreement were concerned, senior counsel for Ceiling Décor argued that they reflected another element of the agreement that had been reached, which was one that bound Mrs Parratt to allow Ceiling Décor access to the roof. It was not an agreement to agree. Ceiling Décor required access to the roof of their premises, to enable roof and lift maintenance to be carried out. That was well understood by Mrs Parratt. It was the reason that lay behind certain of Ceiling Décor's conclusions in the Counterclaim in the earlier action. Mrs Parratt did not wish people to use the stairway. To avoid that being necessary, she had indicated that she was willing to pay for the installation of a hatch in Ceiling Décor's roof. What had been agreed between the parties was that Mrs Parratt would have the option to do so. It had also been agreed between them that, if Mrs Parratt elected not to install the hatch in Ceiling Décor's premises, Ceiling Décor would be permitted to gain access to the roof through the hatch at the top of the stairway. The details of that access, but not the principle of it, could be the subject of further discussion and agreement. There was no room, however, for Mrs Parratt to refuse access to the roof completely. She did not have an option as to where access could be taken. She could install a hatch in Ceiling Décor's premises or allow it through the hatch at the top of the stairway. She could elect to do either. She could not refuse to do both. Counsel for Ceiling Décor submitted that was what had been agreed and what was summarised in Para.4 of the Heads of Agreement.

[145] Senior counsel for Ceiling Décor developed his submissions by referring to a number of authorities. He did so with a view to illustrating the role of the Court and the approach of the Court in determining whether the essentials of a contract had been agreed to and, in cases where they have been, the Court's approach when certain detailed terms of a contract have not been expressly stated or when such terms may be open to more than one construction. Reference was made to Erskine v Glendinning (1871) 9 M. 656, Wright v Newman 1911 S.C. 762, R. & J. Dempster Limited v The Motherwell Bridge and Engineering Company Limited 1964 SC 308, Gordon District Council v Wimpey Homes Holdings Limited 1988 S.L.T. 481, a case in which Lord Cullen held agreement as to the date of entry was not essential to the validity and enforceability of a contract for the sale of land, Neilson v Stewart 1991 SC (HL) 22, Crawford v Bruce 1992 S.L.T. 524, where the Court held that a rent review clause was void from uncertainty on account of the fact that it lacked the elements that would be necessary for the Court to arrive at the basis on which any revised rent was to be calculated, and Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 W.L.R. 897, per Lord Hoffman at pp.912 -913.

[146] Senior counsel argued that the 'factual matrix' within which the agreement was reached included the parties' respective conclusions in the earlier action. Everyone had known what they were talking about, both in relation to the use of the stairway as a fire escape and about Ceiling Décor's requirement to gain access to the roof. Returning to his question 'Which essentials are missing?', he argued that all the essential requirements of servitude right of access for fire escape purposes had been agreed and that the detailed terms of the necessary Deed of Servitude could be implied by law. Furthermore, it had been accepted by Mrs Parratt that the contingency included within Para.3 had been purified.

[147] Likewise in relation to the subject matter of Para.4, senior counsel argued that when what had been agreed was properly analysed, it was clear that the essentials of a binding contract had been agreed. Whilst Mrs Parratt had been granted the option as to whether she would create an access hatch through the roof of Ceiling Décor's premises, properly construed the last sentence in Para.4 was not 'an agreement to agree'. What it recorded was an agreement between the parties that if Mrs Parratt elected not to construct an access hatch in Ceiling Décor's premises, then she would consent to Ceiling Décor having access through the hatch at the top of the stairway. The need for and purposes of such access were clear. All that required to be discussed were matters of detail.

Decision
[148] I have given very careful consideration as whether, and if so how, I should at this stage determine the question as to whether there ever was a formally valid agreement to settle the action on the basis set out in the Heads of Agreement document. Counsel for Mrs Parratt indicated that if I was minded to answer that question in favour of Mrs Parratt, then I should sustain her first plea-in-law and dismiss the action.

[149] Having considered the submissions of counsel in relation to this question, I have reached view that I should not, at this stage, sustain Mrs Parratt's first plea-in-law and dismiss the action as being irrelevant. I have reached that view for a number of reasons. In the first place I consider there is force in the contention of senior counsel for Ceiling Décor that the submissions advanced by counsel for Mrs Parratt, in seeking dismissal of the action, as opposed to decree of absolvitor, were not fully heralded in Mrs Parratt's Note of Proposals, by the use of the term 'formally valid agreement'. Nor did Lord Macfadyen's interlocutor of 10 June 2002 explicitly provide that the proof he was allowing would be in respect of Mrs Parratt's first plea-in-law. Even allowing for the fact that the present action is a commercial cause, those submissions were not fully focused in the defences. Secondly, it has to be remembered that Mrs Parratt's defences include a fourth plea-in-law, to the effect that the obligation relied on by Ceiling Décor is void from uncertainty. It is agreed that issues relating to that plea were not before me during this proof. As the issues of whether a contract is valid and enforceable and whether it is void from uncertainty sometimes overlap, there may be force in addressing both those issues during the same hearing. Thirdly, and most importantly, neither counsel has made detailed submissions as to whether, and if so by which procedures, any detailed conditions or provisions that may be necessary, to implement the elements of the agreement referred to in Paras.3 and 4 of the Heads of Agreement, could be implied by the Court. In these circumstances, viewing the issues involved as issues of relevancy, I am not at this stage persuaded that Ceiling Décor have no prospects of establishing (i) that the agreement entered into on 15 August 2000 is not void from uncertainty, (ii) that the agreement is an enforceable contract, which is capable of settling the earlier action, and (iii) that the Court should imply any conditions necessary to ensure that both parties implement their obligations in terms of that agreement.

[150] Against that background, I will put the action out By Order, for a discussion as to future procedure. During that hearing, I intend to raise with parties whether it would be worthwhile to explore the possibility of referring the disputes between the parties to a mediator. Having regard to the history of litigation since Ceiling Décor acquired their premises, it appears to me that every effort should be made to bring the disputes between the parties to a conclusion.